Portability Network Moves Small 401(k)s Into IRAs

A program run by Vanguard, Fidelity and Alight is reducing cash-outs from small retirement accounts when workers change jobs.

Updated on Nov. 7, 2026 in Retirement Planning

Portability Network Moves Small 401(k)s Into IRAs

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The Portability Services Network moves small 401(k) balances into safe harbor IRAs when workers leave an employer, aiming to reduce cash-outs. The cash-out rate for balances under $1,000 has fallen to about 9% from 50% since the network launched in late 2023.

Why it matters

Cashing out retirement savings when changing jobs triggers income taxes and possible early withdrawal penalties for workers under 59½, which erodes long-term savings. The network's approach offers a way to keep small balances invested for retirement across the United States.

Cash-out rates for balances under $1,000 dropped to about 9% from 50%, while only 6% of interim IRA accounts have reached new employer plans as of early 2026. Roughly 1.22 million eligible participants still await matching, leaving the long-term outcome uncertain.

The players

Vanguard

Vanguard is a major American investment management firm best known for its low-cost index funds and its role as a retirement plan provider.

Fidelity Investments

Fidelity Investments is a large Boston-based financial services company that administers workplace retirement plans and individual retirement accounts for millions of Americans.

Alight Solutions

Alight Solutions is a benefits administration and human capital technology company that manages retirement plan recordkeeping for employers.

The details

The network, which launched in late 2023 and includes Vanguard, Fidelity Investments and Alight Solutions, automatically moves small balances into a safe harbor IRA while attempting to match them with new employer plans. Roth 401(k) accounts cannot currently be automatically rolled into Roth IRAs under IRS rules, and officials are advocating for legislative changes to expand the system to include Roth savings.

Late 2023: Portability Services Network launches.
Early 2026: Only 6% of transferred accounts have reached new employer plans.
Since launch: More than 53,000 transactions totaling $71.3 million completed.

Retirement Planning

The network works within current IRS rules that allow automatic rollovers of traditional balances but not Roth 401(k) accounts, which is the gap lawmakers are now pressing to close. Its progress since 2023 will show whether automatic portability can keep small retirement balances from being cashed out at scale.

Workers who change jobs with a small 401(k) balance may have it automatically moved into an IRA rather than cashed out, avoiding immediate taxes and penalties if they are under 59½. Roth 401(k) balances are not currently covered by the automatic rollover, so those savers should check how their account will be handled.

The takeaway

Before cashing out a small 401(k) after leaving a job, check whether your plan offers a rollover or portability option, since keeping the money invested avoids taxes and penalties. Confirm how any Roth balance will be treated, because automatic transfers do not currently cover Roth 401(k) accounts.