It seems 401(k) auto-portability came just in time, as state encroachment into the retirement savings space continues.
Pennsylvania is making it possible for the state to liquidate some retirement accounts that sit dormant for three years, seeking to label them as abandoned.
The Wall Street Journal rightly notes that “the move is raising some concerns, particularly over how it might affect young savers who may not have a full handle on their finances.”
Critics also allege it’s a move to get aggressive with unclaimed property, a trend over the past two decades “that has seen some states change laws to deem accounts abandoned based on no contact rather than returned mail and shorten their dormancy periods to three years from five years.”
Pennsylvania Treasury spokesman Scott Sloat sent a letter to the Investment Company Institute, claiming the law wasn’t amended to “grab funds to balance the Commonwealth’s budget.”
“The amendments, which were passed in July and take effect Sept. 10, remove the requirement that owners of retirement accounts that are presumed abandoned must reach 70.5 years of age before account holders are required to report the account to the state, which must liquidate it,” the Journal added.