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The Retirement Savings Lost and Found Act

Bill Number: 
Date Introduced: 
Wed, 02/28/2018 - 00:20

This bill sponsored by Elizabeth Warren (D-MA) and Steve Daines (R-MT) was reintroduced on February 28, 2018 as S. 2474. The new version of the bill adds language that would limit searches by ongoing pension plans for retirees who left their plans before retirement age and have not applied for their benefits. See our blog post.

Here is our summary of the original bill that was introduced in 2016:

Legislation introduced by Senators Elizabeth Warren (D- MA) and Steve Daines (R-MT) is aimed at solving a problem that affects so many retirement plan participants and retirees today – the problem of lost retirement benefits. The Retirement Savings Lost and Found Act of 2016 (S. 3078) would create an Office of Retirement Savings Lost and Found that would serve as a central location of retirement plan information and would connect individuals with the retirement benefits they have earned. The office would be a vast improvement over the current hodgepodge situation in which people who have earned retirement benefits must search a multitude of sources in order to retrieve their benefits. Sometimes the benefits are never found.

The bill would create an online search tool that would enable pension and 401(k) plan participants to search for their plans and find contact information for the current plan administrator. Importantly, the plan information in the online directory would be updated regularly based on the latest information provided by employers to the Internal Revenue Service (IRS).

Participants with small accounts have a particularly hard time finding their benefits after they have stopped working for an employer, and some may have forgotten about the benefits they earned. Under current law, plan administrators are permitted to make “forced transfers” to Individual Retirement Accounts (IRAs) for participants with account balances of $5,000 or less in two circumstances: (1) once a participant has left employment and cannot be found or (2) when a participant does not make an election indicating where to send the money in the account. These forced transfers must be specifically permitted under the rules of the participant’s plan. Accounts of $1,000 or less may be paid out in cash if not transferred to an IRA.

In a 2014 report, 401(k) Plans: Greater Protections needed for Forced Transfers and Inactive Accounts, the U.S. Government Accountability Office recently reported that nine large IRA providers had opened 1.8 million forced-transfer accounts as of 2013 with retirement savings totaling $3.4 billion dollars. The Retirement Savings Lost and Found Act of 2016 would direct all employer-provided information on small-account forced transfers to one location, the Office of Retirement Savings Lost and Found, to enable participants to locate their benefits.

The bill:

  • Would establish an Office of Retirement Savings Lost and Found that would collect the information needed for participants to locate their benefits.
  • Would create an online searchable database of plans and current contact information for plan administrators, which would be regularly updated based on information provided by employers to the IRS as part of current reporting requirements.
  • Would increase account balance limits for small-account forced transfers from $5,000 or less to $6,000 or less.
  • Would require employers to report specific information about forced transfers: the name of the participant whose account was transferred, the amount of the account, and, for IRAs, the name and address of the IRA issuer that received the account. If an annuity is purchased for a participant, employers would report the issuer of the annuity and the contract number. Employers would send this information to the IRS as part of current reporting requirements. The information given to the IRS would be transferred to the Office of Retirement Savings Lost and Found.
  • Would require plan administrators making a forced transfer of an account of $1,000 or less to send the money to the Director of the Retirement Savings Lost and Found or to the Secretary of the Treasury for investment in United States securities when (1) a participant cannot be found, or (2) when a distribution is sent but not claimed by the participant. Such transfers could not be made until six months after a participant has been notified of the right to the benefit or six months after an attempted payment is made.

Under the provisions of the bill, the Secretary of Labor will provide guidance on investment options for mandatory (forced) transfers of small accounts of $6,000 or less to individual retirement plans in which a participant cannot be found or a participant does not make an election for a distribution. These mandatory transfers can be invested in target date or lifecycle funds, or other investment option determined by the Secretary of Labor. 

Elizabeth Warren
Steve Daines