Help may be on the way for workers who lose track of their
401(k) accounts as they move from job to job throughout their careers.
Under a proposal included in retirement legislation that’s
pending in Congress, an online “lost and found” database would be established
to help locate those missing accounts, as well as lost pension benefits.
Although lawmakers are in the early stages of considering changes, it’s an
initiative that has bipartisan backing and is supported by retirement
advocates.
“We have serious problems with retirees not being able to
use their benefits that they earned or saved because they simply cannot find
them,” said Anna Tabor, director of the Pension Action Center at the University
of Massachusetts Boston.
As more workers change jobs throughout their career — the
average is 12 jobs, according to one government study — it’s not unusual for
multiple 401(k) accounts to be left with ex-employers. More than 16 million
accounts of $5,000 or less — $8.5 billion in the aggregate — remained in
workplace plans from 2004 through 2013, according to a report from the Government
Accountability Office.
“People assume the money will still be there when they need
it,” Tabor said. “The problem is that there can be lots of changes — the
employer could go out of business, go bankrupt or merge with another company,
or the plan may be terminated.”
The congressional proposal would create an office at the
Pension Benefit Guaranty Corporation to oversee and administer the lost and
found program. It would accept account transfers of less than $1,000 from plans
and would try to locate the owner. Individuals also would be able to search the
database for contact information for their plan.
“If the company has moved to South Carolina or New Zealand
or wherever, or is now Company Z not Company X, the lost and found will have
that information,” said Karen Ferguson, president of the Pension Rights Center,
a consumer advocacy group.
The PBGC already provides help to people whose plans —
pensions or 401(k) plans — have terminated. It does not, however, have
information on accounts or benefits tied to plans that are ongoing, Ferguson
said.
Generally speaking, companies with retirement plans are
expected to do their due diligence in trying to locate account holders.
“The Labor Department takes the position that 401(k) plans
have to go through certain search procedures as part of their fiduciary duty,”
Ferguson said.
The agency also has helped connect individuals with
accounts: Last year, it recovered about $1.5 billion in pension benefits owed
to vested ex-employees.
In some cases, missing 401(k) accounts also may end up with
a state’s unclaimed property list, which is typically searchable online through
a state portal. Other accounts end up with firms that specialize in locating
the owners.
“The [current] system is decentralized,” Tabor said.
“There’s no one place to go to find out where your account is.”
For now, she said, people who have lost track of their
account should first call their former employer if the company is still in
existence. If not, you should try to track down the successor company, if there
is one. You also can call the financial institution that was holding the
account (i.e., a company like Fidelity Investments or Vanguard).
“But they might not have it any more and they may not have
records of where it went,” Tabor said.
Ex-employees also may stop receiving communications from a
plan if they change their address, cellphone number or other contact
information and forget to update it with the plan administrator, which also can
lead to losing track of an account.
“Then they may be under the mistaken belief that the plan
will stay in the same place and the same form,” Tabor said. “But so many
changes can happen in the intervening years that it isn’t the case.”
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