Cash-outs of small leftover 401(k) balances fell after some employers joined an automatic portability system, Vanguard research found, though most of that money has not yet reached a new workplace plan, CNBC reported on Oct. 31¹.

Among workers with less than $1,000 in a 401(k), the share who cashed out within 10 months of leaving a job fell to about 9% from roughly 50% after their employers began using the Portability Services Network, according to Vanguard as summarized by CNBC¹. For balances between $1,000 and $7,000, cash-outs fell to 31% from 39%¹.

The network is a coalition of large 401(k) administrators, including Vanguard, Fidelity Investments and Alight Solutions, working with Retirement Clearinghouse, and has operated since late 2023, CNBC said¹. When a worker with a small balance leaves a participating employer, the money is generally rolled into a safe harbor IRA until the network matches it to a new employer plan that also participates¹.

In Vanguard's research, just 6% of accounts transferred into those IRAs had reached a new employer plan as of early 2026, largely because few employers have opted in, CNBC reported¹. The rest generally remained in interim IRAs waiting for a match¹. Workers can still roll the money themselves, CNBC noted¹.

Of about 220,000 outbound rollovers involving Vanguard participants that were analyzed, the median balance was $200 and nearly three-quarters were under $1,000, CNBC said¹. The typical saver was 31 years old, earned about $20,000 a year and had worked for the employer about six months¹. The cash-out analysis covered workers at 83 Vanguard-administered plans that adopted automatic portability¹.

Federal rules generally let workers leave balances above $7,000 in a former employer's plan; amounts under $1,000 are often cashed out, and balances of $1,000 to $7,000 are often rolled to an IRA if the worker takes no action, CNBC said¹. Withdrawals can trigger income taxes and a 10% penalty before age 59½, and the money loses future compounding¹.

Steve Holman, senior vice president of Portability Services Network strategy and development at Retirement Clearinghouse, told CNBC that since the network launched in November 2023 there have been 53,118 completed transactions totaling $71.3 million moved into new employer plans¹. He said 23,787 plans have adopted automatic portability, covering 7.73 million participants, versus about 96 million people in 401(k)s and similar workplace plans¹.

Holman said 1.22 million eligible participants are waiting to be matched with a new employer, up more than 25% since the start of 2026¹. An Empower survey of 2,005 adults, cited by CNBC, found 84% of workers have changed employers at least once and that many younger respondents said they may have lost track of prior-employer savings¹.

Vanguard's study, as quoted by CNBC, said earnings on conservative default investments may not offset recurring fees while accounts remain unmatched, leaving small balances vulnerable to erosion¹. Holman also told CNBC the industry is seeking legislation so Roth dollars can move under auto-portability, because IRS rules do not allow a Roth IRA to roll into a new employer's 401(k)¹.

Sources

1. CNBCAutomatic 401(k) rollovers reduce cash-outs, research finds — but few accounts reach new employer plans9:30 AM

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