DEFINITION of Portability

Portability is an employee's ability or right to retain certain benefits when switching employers. Benefits such as certain pension plans and health insurance have portability. Most 401(k) plans have portability of benefits as well as health savings accounts (HSAs).


Portability is a U.S. employee's right to keep or maintain certain benefits when switching employers or when leaving the workforce (retiring). The Health Insurance Portability and Accountability Act of 1996 (HIPAA) provides rights and protections for participants in group health plans. HIPAA states that employer health insurance plans may not be able to exclude coverage for preexisting conditions; provides opportunities to enroll in a group health plan if either coverage is lost or certain life events occur; prohibits discrimination against employees and their dependent family members based on health factors; and assures that certain people will have access to, and can renew, individual health insurance policies.

HIPAA published a forward-looking report in March 2018 in which Director Roger Severino hinted there could be some 2018 HIPAA changes, although the Trump administration has communicated a decrease rather than an increase in regulation. This has the potential to translate to a reduced burden of compliance and greater information sharing among healthcare organizations; however, at the same time, the Global Data Protection Regulation (GDPR) in the EU is forcing many companies that offer healthcare benefits to employees to tighten its policies. Now, with regards to portability, organizations must carry out lengthy audits of personal data, including determining the type, location, and purpose of the data, along with its administrator, current security measures, and ability with which individuals can access it.

Portability and IRA Rollovers

Portability is an important concept in an IRA rollover. An IRA (or other retirement account) rollover occurs when the retirement plan administrator pays the plan’s proceeds directly out to another plan, often in the form of a check, payable to the new account or electronic means. This is a direct rollover. In the case of a 60-day rollover, funds from a retirement plan or IRA are paid directly to the investor, who deposits some or all of the funds in another retirement plan or IRA within 60 days. Taxes are typically not paid when performing a direct rollover or trustee-to-trustee transfer. However, distributions from a 60-day rollover, and funds not rolled over, are typically taxable.

Understanding the financial logistics and how other benefits transfer between plans is essential before undertaking a rollover.