In the aggregate, how bad is the problem created by participants who leave their retirement accounts behind when they move to a new employer? Try this:
• The average annual U.S. employee attrition rate is 23%.
• 45% of employees leave their retirement accounts behind.
• 43% of the assets held by 401(k) participants who left their jobs in the first quarter of 2008 had not been moved a year later, according to Charles Schwab.
• There are an estimated 15 million “orphan” accounts.
• At an annual cost between $25 and $35 per orphan account, the total cost is between $375 million and $525 million a year.
One of the biggest problems, a recent BenefitsPro article notes, is unclaimed checks sent by plan sponsors to missing participants, since that money remains in the plan. A recommended solution: a rollover IRA set up by the plan sponsor on behalf of missing participants. While the plan sponsor must hold enough money in reserve to pay out that money if past participants claim their “lost and found” funds, it is off the hook for the cost of maintaining old accounts.
