As explained in my prior Post, each year millions of Americans lose thousands of dollars in retirement savings in the process of changing jobs. The problem largely results from employers shifting from defined benefit plans that pay an annuity for life to defined contribution plans, like 401(k) plans, that pay a lump sum upon separation from employment or at a later date when the participant elects to take his/her lump sum. If a separated participant chooses to leave the lump sum in the plan for the time being, intending to take it at later date, but changes jobs several times thereafter, the participant may lose track of his/her retirement account(s). Indeed, according to the Government Accountability Office, between 2004 and 2013, there was a total of $8.5 billion sitting in “lost” retirement accounts.
To eliminate this problem and ensure workers actually receive their hard-earned retirement benefits, on July 1, 2020, United States Senators Elizabeth Warren (D-Mass.) and Steve Daines (R-Mont.) re-introduced bipartisan legislation to create a national “lost and found” for retirement accounts. The legislation, entitled “Retirement Savings Lost and Found Act of 2020,” would create a national database using data employers are already required to report to the U.S. Treasury such that, “with the click of a button, any worker can locate all of their former employer-sponsored retirement accounts.” As stated in the summary of the Act, there would be “no more lost [retirement] accounts–ever.” This common sense legislation is supported by advocates for both workers and employers, including the Pension Rights Center, American Benefits Council, ERISA Industry Committee, and AARP.
While it seems this proposed legislation would pass in a heart beat, it is important to understand that it was initially proposed back in 2018, but was not enacted. Let’s hope Congress gets it right this time.
[All Posts on this page are written by pension lawyer Eva Cantarella who can be reached at [email protected] or [email protected] If you would like to read more pension posts written by Eva Cantarella, go to her Pension Justice 4 You Facebook page and, click the Like and Following tabs just below the picture at the top of the Page.]