Auto-Portability for 401(k)s Faces Roadblock with Roth Accounts
A system designed to streamline the transfer of small 401(k) balances between employers is encountering a challenge: Roth 401(k) accounts. While auto-portability has gained traction since its launch in late 2023, a legal restriction prevents Roth IRA funds from being rolled back into 401(k) plans, leaving some retirement savings stranded.
The Promise of Auto-Portability
The Portability Services Network (PSN), authorized by the SECURE 2.0 Act of 2022, aims to address the issue of small-balance 401(k) accounts being left behind when employees change jobs. Approximately 31.9 million 401(k) accounts, totaling around $2.1 trillion, remain with former employers, according to 2025 research from Capitalize. PSN facilitates the automatic transfer of balances less than $7,000 into an active retirement account at a new employer, provided the participant is eligible.
The Roth Account Complication
Typically, when an employee leaves a company, 401(k) balances under $1,000 are often cashed out, potentially incurring taxes and penalties. Balances between $1,000 and $7,000 are usually rolled over into an Individual Retirement Account (IRA). Traditional 401(k) funds roll into traditional IRAs, and Roth 401(k) funds roll into Roth IRAs. Though, current federal law prohibits rolling funds from a Roth IRA back into a 401(k) plan.
“It’s unfortunately just the way the tax law works,” said Kelsey Mayo, chief of retirement policy and regulatory affairs for the American Retirement Association, as reported by CNBC. “It can’t legally work for Roth money. If the Roth money rolls out [of the 401(k)], it gets stuck in the IRA.”
Current Adoption and Impact
As of September 30, 2025, 20,997 plan sponsors had adopted PSN’s auto-portability, a 6.2% increase from June 30, 2025. Currently, roughly 21,400 plans are enrolled, representing 6.5 million participants. The six recordkeepers that own the network – Alight Solutions, Fidelity Investments, Empower Retirement, TIAA, Principal Financial Group, and Vanguard – represent 63% of the market share by participant count.
Approximately 1.7 million rollovers occurred in 2025, up from 1.6 million in 2024, according to the Employee Benefit Research Institute. To date, 31,216 IRAs have been successfully matched with workers and rolled into their new 401(k) plans, but these do not include Roth IRA funds.
Legislative Efforts to Address the Issue
The bipartisan Retirement Rollover Flexibility Act, introduced in December 2025, proposes to amend the tax code to allow up to $7,000 in Roth IRA money to be rolled over into 401(k)s. The bills are currently under consideration in their respective chambers of Congress.
Neal Ringquist, chief revenue officer of the Portability Services Network and Retirement Clearinghouse, expressed hope that the restriction will be addressed soon, particularly to benefit participants in state-based auto-IRA programs. These programs often enroll workers in Roth IRAs, and the current rules hinder the portability of those savings when they move to jobs offering 401(k) plans.
Looking Ahead
Addressing the Roth account limitation is crucial to maximizing the benefits of auto-portability and ensuring that all retirement savings can follow workers throughout their careers. If enacted, the proposed legislation could significantly improve retirement savings outcomes for millions of Americans.