Legislation has been introduced to address the proliferation of small accounts that the bill’s sponsors say is costing Americans tens of billions of dollars every year in lost savings because of cash-outs and redundant fees — not to mention lost savings from missing accounts.
Sen. Elizabeth Warren (D-MA) and Steve Daines (R-MT) have reintroduced the bipartisan Retirement Savings Lost and Found Act, noting that many Americans leave their jobs each year without giving their employers directions about what to do with their retirement accounts, and citing a TIAA survey that found that 30% of Americans have left an account at their previous employer, “resulting in tens of millions of Americans with one neglected account and millions more with two or more accounts.” Moreover, the bill’s sponsors note that the increase in employers’ use of auto enrollment since the passage of the 2006 Pension Protection Act has also resulted in a significant increase in the number of small accounts — sometimes without employees even realizing they have one — and that shorter job tenures among younger workers has contributed to multiple inactive accounts for individuals as well.
The Retirement Savings Lost and Found Act purports to rely on the data employers are already required to report to create a national, online lost and found for Americans’ retirement accounts.
The legislation also allows employers to more easily invest abandoned accounts into target-date funds rather than money market funds, and allows for uncashed checks of less than $1,000 to be transferred to Treasury securities, so that individuals can locate this money and continue to save for their retirement. (The original bill had included MyRAs in that category, but since that program has been terminated, the new version omits them.)
The legislation also clarifies the responsibilities employers and plan administrators have to connect former employees with their neglected accounts — specifically, that they: (1) have made at least one unsuccessful attempt to contact the individual at the most recent address maintained for the individual in the records of the plan, by certified mail or other similar delivery service if the most recent address is a physical address, and by electronic mail or other electronic communication (if that’s the only address on record); and (2) have taken at least one (or two, if the only address on record is electronic) of these four additional measures:
- Check with the administrator of a related plan or checked the plan sponsor’s records for an updated address.
- Make at least one unsuccessful attempt to contact the individual’s designated plan beneficiary (by the methods described earlier).
- Perform at least one search using free electronic search tools.
- Attempt to locate the participant using a commercial locator service.