Senator Elizabeth Warren, D-Mass., who most recently brought (what else?) Dunkin’ Donuts to fellow Dems occupying the House in an attempt to bring gun-control legislation to the floor, also has a plan to develop a national “lost-and-found” for retirement savings plans.
Warren and Senator Steve Daines, R-Mont., introduced the “Retirement Savings Lost and Found Act” on Wednesday to “protect hard-working Americans’ retirement savings.”
According to the text of the bill, the shift from defined benefit plans to 401(k)s has made it more difficult for workers to track, manage and consolidate multiple retirement accounts as they move from job to job. It cites a 2014 Government Accountability Office (GAO) report found that many Americans leave their jobs each year without giving their employers directions with what to do with their retirement accounts.
It also referenced a TIAA study that found 30 percent 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.
GAO found that the increase of 401(k) plans, the frequency of auto enrollment into these plans as permitted by the Pension Protection Act of 2006, and shorter job tenures among younger workers contribute to multiple inactive accounts for individuals.
“Working Americans are losing hard-earned dollars up until the time when they need it most—their retirement,” Daines said upon introduction of the bill. “When an employee leaves a job, it’s often hard for them to keep track of their retirement accounts during these transitional times. This is a commonsense approach that will empower individuals to take control of their retirement future.”
“Our country faces a retirement crisis, and it’s important that all workers have a real chance to build retirement security,” Warren added. “But today, millions of Americans are losing critical savings when they move between jobs. This bipartisan bill will help protect the retirement savings employees have earned.”
The two say the act uses data employers are already required to report 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.”
The act also:
- Allows employers to more easily invest abandoned accounts into target date funds rather than money-market funds. According to the GAO, $1,000 in a target date account was projected to grow to $2,700 over thirty-years whereas a $1,000 in a money market account was reduced to $0.
- Allows for “orphaned” funds with balances less than $1,000 to be transferred to Treasury securities, such as the myRA, so that balances earn a positive return.
The bill is supported by AARP and the Pension Rights Center.
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.
