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Retirement Savings Lost and Found Act of 2021

The bipartisan Retirement Savings Lost and Found Act of 2021 (S. 1730), reintroduced by Senators Elizabeth Warren (D-MA) and Steve Daines (R-MT) on May 20, 2021, will make it possible for countless former employees to find their old employers and claim their retirement benefits.

The legislation is aimed at solving a problem that affects many retirees today – the problem of locating “lost” retirement plans and benefits. Every year thousands of individuals arrive at retirement and are unable to find the pension, 401(k), or other benefits they have earned. Most often that is because the company they worked for years before has moved to a new location, changed its name, or merged with another company. The individuals are unable to find their old employers. The problem of “lost plans” has become more acute in recent years as business reorganizations have become more common.

The Retirement Savings Lost and Found Act of 2021 would create an Office of Retirement Savings Lost and Found at the Pension Benefit Guaranty Corporation (PBGC) that would serve as a central location for retirement plan information so that individuals could search for their former employers and claim their retirement benefits. 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 to locate former employers and retrieve their benefits. Sometimes the benefits are never found.

The Office of Lost and Found would include an online searchable plan registry that would enable pension and 401(k) plan participants to search for their former employers and find contact information for the current plan administrator. Using the contact information from the plan registry, participants will be able to contact the plan administrator and claim their benefits. Importantly, the plan information in the online registry would be updated regularly based on the latest information provided by employers to the Internal Revenue Service (IRS). The registry would be similar to online databases that the PBGC now maintains to help individuals in terminated plans to find and claim their benefits.

The Office of Lost and Found would also have information about small account transfers to Individual Retirement Accounts (IRAs) for former employees who cannot be located (“missing participants”). The law permits employers who do not want to keep small amounts in their retirement plans to “cash out”, or transfer, small accounts of former employees with a value of $5,000 or less. The rules of the plan must permit the cash-out. When a former employee cannot be found, and the amount in the account is greater than $1,000 but not more than $5,000, the account balance can be transferred to an Individual Retirement Account (IRA) in the former employee’s name.

The Lost and Found Act would increase the cash-out limit from $5,000 to $6,000 and require employers to report, on an existing IRS form, information about all transfers of small missing participant accounts to IRAs. The IRS would send this information to the Office of Lost and Found to be included in an online database. This information would include the name of the participant whose account was transferred, the name, address and contact information for the IRA issuer that received the account and the account number of the IRA. If an annuity is purchased for a participant, employers would report the name and address of the annuity issuer and the annuity contract number. This reporting requirement would be particularly helpful to participants with small accounts who can have a hard time finding their benefits after they have stopped working for an employer. ^[i]

In the case of “missing participant” accounts of $1,000 or less that are cashed-out, the Lost and Found Act would require plan administrators to send the money to the Office of Lost and Found. Such transfers could not be made until six months after a participant has been notified of the right to the benefit and does not make an election to receive it, or six months after an attempted payment is made.

Finally, the Retirement Savings Lost and Found Act requires the Secretary of Labor, in consultation with the Secretary of the Treasury, to specify the steps an employer must take to locate former employees who do not claim their benefits at retirement age.

The Retirement Savings Lost and Found Act is included in two larger bills, the Securing a Strong Retirement Act of 2021 (H.R. 2954), which was passed unanimously out of the House Ways and Means Committee in early May, and in the Retirement Security and Savings Act of 2021 (S. 1770), which was introduced in the Senate two weeks later.

[i]In a 2014 report, 401(k) Plans: Greater Protections needed for Forced Transfers and Inactive Accounts, the U.S. Government Accountability Office 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.

Read our blog post on the bill.