Innovation plays an important role in improving retirement plan administration, but new solutions should be evaluated carefully before they are treated as being better simply because they are new. The most useful innovations are those that clearly improve participant outcomes, simplify administration, and reduce unnecessary cost or fiduciary complexity.

Auto-portability and state unclaimed property funds have recently received attention as potential solutions for reconnecting missing participants with retirement plan balances. While the objective is important, the practical question is whether these approaches improve meaningfully on existing solutions, specifically automatic rollover IRAs.

This blog examines both options through that lens, focusing on their marketed benefits, known limitations, and potential trade-offs for service providers, plan sponsors, and participants.

Auto-portability

Auto-portability has been promoted as helping participants stay connected to retirement savings as they change employers. For clarification, auto-portability includes an automatic rollover IRA program. It is required by law. Auto-portability just adds the automatic transfer of eligible balances from an automatic rollover IRA to a new employer’s plan – for an additional fee after notices are sent to the individual.

Supporters market several benefits, but many of those outcomes are already achieved through existing automatic rollover IRA programs. For example, a recent article written by a representative of the Portability Services Network (PSN) provides seven reasons why plan sponsors should adopt auto-portability. However, the article is flawed in three main areas.

• The article cites participant cash-outs following job changes as evidence that auto-portability can help reduce plan leakage. However, participants who voluntarily request distributions and choose to cash out make that decision before auto-portability enters the process. Auto-portability has minimal, if any, effect in reducing leakage caused by voluntary participant behavior.
• The article promotes auto-portability for lowering administrative burden and costs. To the contrary, auto-portability adds to burden and costs through additional participant-paid fees through negative consent and fiduciary responsibility for the incoming plan. You can lower administrative burden and costs by simply using automatic rollover IRAs to reduce the number of small-balance accounts and minimize uncashed checks.
• The article states, “Without automation, rollovers are complex, time-consuming, and often abandoned by participants.” Please note that the author represents PSN, the organization promoting auto-portability, which includes the industry’s largest recordkeepers. If these organizations wanted to truly deliver a better participant experience, they should make greater investment in rollover simplification instead of auto-portability. This would provide broader participant benefits than a solution focused primarily on small-balance accounts, especially with the participant-paid fees associated with auto-portability

All seven reasons detailed in the PSN article are either not correlated to the auto-portability process or can be achieved by automatic rollover IRAs. An automatic rollover IRA program can improve participant outcomes and simplify administration without the additional fees or fiduciary responsibility associated with auto-portability. Make sure you are selecting the most useful solution for your circumstances.

State Unclaimed Property Funds

In 2025, the Department of Labor issued guidance providing temporary relief from agency enforcement for those who transfer retirement plan benefits of $1,000 or less owed to missing participants to a state unclaimed property fund. The guidance included a laundry list of requirements to be satisfied, including the utilization of the States’ Unclaimed Retirement Clearing House (SURCH).

In 2026, to capitalize on the DOL’s guidance, the state governments administering SURCH have begun marketing it to retirement plans and recordkeepers. These marketing efforts have some industry observers highlighting the use of state unclaimed property funds as a potential solution for certain missing participant balances. Before adopting this solution, you should evaluate whether alternative solutions might better serve participants.

• As of August 2026, only 37 states participate in SURCH. Therefore, balances for missing participant in the 13 remaining states are not covered by DOL’s guidance. This patchwork process can create administrative burden in comparison to a cleaner alternative (see below).
• DOL guidance is limited to balances of $1,000 or less. SURCH will accept balances over $1,000, but a fiduciary must decide if this is the best course of action based on the circumstance – see next bullet point.
• Not all states participating in SURCH provide earnings. Granted, there are also no fees for an individual claiming their benefits from SURCH. The lack of any earnings, depending upon applicable fees, may result in lower balance than if an automatic rollover IRA were utilized instead.

Looking for the most useful solution to better serve participants? Use automatic rollover IRAs for balances of $1,000 or less. Not only do the plan fiduciaries avoid uncashed checks, but the process also prevents unwanted taxable income and penalties for participants.

The Case For Automatic Rollover IRAs

Innovation should be evaluated based on whether it materially reduces administrative burden or improves participant outcomes. While auto-portability and state unclaimed property funds may serve a role in limited circumstances, automatic rollover IRAs continue to offer a scalable solution that preserves retirement assets, reduces plan burdens, and keep funds connected to participants.

Especially as we approach another document restatement cycle, consider the plan features that represent the most complete and participant-focused solution for addressing small balances and missing participants. Until a more effective alternative emerges, automatic rollover IRAs remain the benchmark against which new solutions should be measured.

About the Author

Brian Furgala, Esq., CPC, QPA is Senior Director, Retirement Services Strategy for PenChecks, a leader in outsourced retirement plan distribution processing and Automatic Rollover/Missing Participant IRAs and related services. His broad experience as an ERISA attorney and senior executive for several leading retirement plan service providers gives him a unique perspective on the industry.

The views expressed in this article are those of the author and do not necessarily represent the views of PenChecks Trust®, its subsidiaries or affiliates.