A new effort to keep small 401(k) accounts from falling through the cracks is gaining traction — but Roth balances are limiting its reach. The Portability Services Network, launched after the 2022 Secure 2.0 law, can reunite many old retirement accounts with workers at new employers, yet current tax rules leave Roth money stranded in IRAs and out of the system’s automatic transfers.
How the portability system is supposed to work
The Portability Services Network, backed by major recordkeepers and run with technology from Retirement Clearinghouse, was created to prevent small 401(k) accounts from being abandoned when workers change jobs. It periodically checks whether owners of small-balance IRAs have been newly enrolled in a participating 401(k), and when it finds a match it moves the money back into the workplace plan.
So far, that process has reunited more than 31,200 IRAs with their owners’ new employer plans. Participation is expanding: about 21,400 plans representing roughly 6.5 million participants are enrolled, and network organizers say full implementation among the major recordkeepers would cover roughly 63% of the market.
Where Roth accounts create a snag
Federal tax rules prevent rollovers from a Roth IRA into a workplace 401(k), even though money in a traditional IRA can move into a 401(k). That distinction is central to the problem: if a small 401(k) balance is moved first into a Roth IRA, the portability network cannot later place those dollars into a new employer’s Roth 401(k).
This is not limited to small accounts. The restriction applies across the board, but it becomes particularly visible when plans use auto-rollovers for balances between $1,000 and $7,000 — the range where former-employer accounts are often sent to IRAs if the worker takes no action.
- Less than $1,000: Plans commonly cash out accounts and issue checks, which can trigger taxes and a 10% penalty if the worker is under 59½.
- $1,000 to $7,000: Many plans automatically roll these balances into IRAs — traditional or Roth, depending on the account type.
- Above $7,000: Workers generally may keep the money in their former employer’s 401(k) and, if the new employer allows, roll it directly into the new plan.
- Key limitation: Funds that land in a Roth IRA cannot later be moved into a 401(k) because of current tax law.
That mix of rules can leave workers with split and confusing retirement records: pretax funds may follow them to a new plan while their Roth savings remain parked in an IRA.
Why this matters now
Workers change jobs frequently — the typical American holds more than a dozen jobs over their career — and millions of 401(k) accounts are left at former employers. Research firm Capitalize estimated there were about 31.9 million old 401(k) accounts holding roughly $2.1 trillion in assets. In 2025 alone an estimated 1.7 million of the small-balance rollovers took place.
Because many of those rollover IRAs sit in cash, they miss out on investment returns, which can erode long-term retirement savings. The portability network is intended to reduce account fragmentation and limit situations where savers lose track of or cash out retirement money — but the Roth restriction reduces the system’s scope.
Legislative fix could expand portability — but prospects are uncertain
Lawmakers have introduced the Retirement Rollover Flexibility Act, a bipartisan proposal that would change the tax code to allow up to $7,000 in Roth IRA savings to be rolled into employer 401(k) plans. If enacted, the measure would remove the legal barrier keeping many Roth balances out of auto-portability.
Advocates say the change would especially help participants in state-run auto-IRA programs, where many workers save exclusively in Roth IRAs and then find their savings difficult to move if they later join an employer-sponsored plan. State auto-IRA programs have enrolled over 1.1 million workers, most in Roth accounts, proponents note.
Industry officials and retirement policy experts say legislation or regulatory guidance is the clearest path to expanding portability to Roth savings, but the bill’s future in Congress is still uncertain.
For savers, the immediate takeaway is practical: check the type of account your balances were rolled into and verify whether your new employer’s plan accepts rollovers. Until the tax rules change, Roth dollars that move into a Roth IRA may remain outside the automatic portability pipeline.
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Jordan Keller specializes in analyzing the US financial markets. With concrete recommendations, he helps you secure and boost your investments by providing strategies that adapt to market fluctuations.