Recent polls have Elizabeth Warren taking the lead in voter preference as Joe Biden’s vice-president pick, but now the Massachusetts senator and liberal gadfly is grabbing attention for her legislation to address, in part, the problem of missing retirement plan participants.
Warren and Senator Steve Daines, R-Mont., re-introduced the bipartisan Retirement Savings Lost and Found Act on July 1. It would create a national, online “lost and found” for Americans to track their retirement accounts as they move between jobs.
A House version was introduced by Representatives Suzanne Bonamici, D-Ore., and Jim Banks, R-Ind.
“Millions of Americans lose thousands in savings each year because of lost retirement plans from previous employers and other roadblocks to tracking multiple accounts,” Warren said in a statement. “Our bipartisan Retirement Savings Lost and Found Act of 2020 is a common-sense step we can take now to help hard-working Americans build a little more security and retire with the dignity they deserve.”
TIAA estimates that 30% of employees left a retirement account at their previous employer, including 43% of Gen Xers and 35% of Gen Yers. And according to the Government Accountability Office, millions more have left two or more accounts behind.
Between 2004 and 2013, there was a total of $8.5 billion sitting in lost retirement plans with just $5,000 or less in them.
This problem is only expected to grow in the coming years, the politicos add, as young workers switch jobs at much higher rates than their older counterparts—the median job tenure for workers between ages 25 and 34 is less than 3 years.
“Americans are already an estimated $7.7 trillion short on what they need for their retirement, and some are now relying on their retirement savings to help manage income loss or cover expenses during the current recession.”
Provisions of the bill include:
National lost and found for retirement accounts
It uses data employers are already required to report to the Treasury Department to create a national, online, lost and found for Americans’ retirement accounts. “This means that with the click of a button, any worker can locate all of their former employer-sponsored retirement accounts. No more lost account—ever.”
Maximizes investment earnings
The act also makes it easier for plan sponsors to move small accounts into age-appropriate target-date funds so that workers can maximize their investment returns.
Reinvests small cashed-out accounts
Requires plan sponsors to send lost, uncashed checks of less than $1,000 to Treasury so that individuals can locate this money and continue to save for their retirement.
Heavy hitters have backed the bill, including the Pension Rights Center, American Benefits Council, the ERISA Industry Committee, and the AARP.
“We applaud Senators Warren and Daines and Congresswoman Bonamici and Congressman Banks for introducing the Retirement Savings Lost & Found Act, which will help employers ensure that workers receive the retirement benefits that they have earned,” Aliya Robinson, senior Vice President of Retirement and Compensation Policy, The ERISA Industry Committee, said in a statement. “ERIC member companies maintain retirement plans with the goal of workers actually receiving these benefits. Therefore, ERIC has worked with Congress and the Department of Labor on the issue of missing participants for several years and support this effort to resolve the missing participant problem.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
