The legislature needs to repair the issue
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For workers who lose track of their 401 (k) savings accounts, help can be on the way.
Proposed pension laws pending in Congress would create an online lost and found database to aid in finding these accounts, along with a variety of other provisions. While lawmakers are still in the early stages of considering changes, pension advocates say the initiative – which would also make it easier for people to access lost pension benefits – cannot come soon enough.
“We have serious problems with retirees not being able to use the benefits they have earned or saved because they just can’t find them,” said Anna Tabor, director of the Pension Action Center at the University of Massachusetts Boston.
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As more and more workers change jobs over the course of their careers – an average of 12 jobs according to a government study – it is possible that multiple 401 (k) accounts may remain with former employers. From 2004 to 2013, more than 16 million accounts valued at $ 5,000 or less – a total of $ 8.5 billion – remained on workplace plans, according to a report by the Government Accountability Office.
“People assume that the money is still there when they need it,” said Tabor. “The problem is, there can be a lot of changes – the employer could go out of business, go bankrupt, merge with another company, or the plan can be terminated.”
The provision in the Congressional proposal would create an office at Pension Benefit Guaranty Corp. create to oversee and manage the lost and found items program. It would accept bank transfers of under $ 1,000 from plans and try to find the owner. Individuals could also search the database for contact information for their plan.
“If the company has moved to South Carolina or New Zealand or wherever, or is now Company Z and not Company X, the lost and found will have that information,” said Karen Ferguson, president of the Pension Rights Center, a consumer protection group.
The PBGC is already providing assistance to people whose plans – pensions or 401 (k) s – have expired. However, there is no information on accounts or benefits associated with ongoing plans, Ferguson said.
In general, retirement planning companies are expected to do their due diligence in finding account holders.
“The Department of Labor has taken the position that 401 (k) plans must go through certain search processes as part of their fiduciary duty,” Ferguson said.
We have serious problems with retirees being unable to use the benefits they have earned or saved because they simply cannot find them.
Director of the University of Massachusetts Boston Pension Action Center
The agency has also helped connect individuals to accounts: approximately $ 1.5 billion in retirement benefits were reclaimed to former employees last year.
In some cases, missing 401 (k) accounts can also end up with an unclaimed state property list, which can usually be searched online through a state portal. Other accounts end up with companies that specialize in finding owners.
“The [current] The system is decentralized, “said Tabor.” There is not a single place to find out where your account is.
If you have lost track of your account, you should first call your former employer if the company still exists. If not, you should try to find the successor company, if there is one. You can also call the financial institution that held the account (e.g. Fidelity Investments or Vanguard).
“But they may not have it anymore and they may not have a record of where it went,” Tabor said.
Former employees will also no longer be able to receive notifications from a plan if they change their address, cell phone number, or other contact information and forget to update them with the plan administrator, which can also cause them to lose track of an account.
“Then they could mistakenly believe that the plan will stay in the same place and in the same form,” said Tabor. “But so many changes can happen in the years in between that it doesn’t.”