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The Retirement Savings Lost and Found Act of 2018

The Retirement Savings Lost and Found Act, sponsored by Elizabeth Warren (D-MA) and Steve Daines (R-MT), was reintroduced on February 28, 2018 as S. 2474. The original version of the bill was introduced in 2016 (as S.3078) The new version of the bill adds language that would limit searches by ongoing pension plans for retirees who left their plans before retirement age and have not applied for their benefits.

The legislation is aimed at solving a problem that affects many retirees today – the problem of locating “lost” retirement plans. The Retirement Savings Lost and Found Act of 2018 would create an Office of Retirement Savings Lost and Found that would serve as a central location of retirement plan information so that individuals could search for the retirement benefits they earned from their former employers. 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 Retirement Savings Lost and Found Act of 2018 would:

Create an online searchable database that would enable pension and 401(k) plan participants to search for their plans and find contact information for the current plan administrator. Importantly, the plan information in the online directory would be updated regularly based on the latest information provided by employers to the Internal Revenue Service (IRS).

Add new requirements for “forced transfers”: The bill would:

• Require employers to report “forced transfers” on an existing IRS form. The IRS would send this information to the Office of Retirement Savings Lost and Found to be included in the online searchable database. Plan administrators are permitted to make “forced transfers” to Individual Retirement Accounts (IRAs) for participants with account balances of $5,000 or less in certain circumstances.¹  This reporting requirement would be particularly helpful to participants with small accounts who can have a particularly hard time finding their benefits after they have stopped working for an employer. Currently accounts of $1,000 or less can be paid out in cash if not transferred to an IRA.²
• Increase the account balance for forced transfers from $5,000 to $6,000.
• Require employers to report specific information about forced transfers. This information would include the name of the participant whose account was transferred, the name and address of 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.
• Employers would send this information to the IRS as part of current reporting requirements and the information would be transferred to the Office of Retirement Savings Lost and Found to be included in the online searchable database.
• Require plan administrators making a forced transfer of an account of $1,000 or less to send the money to the Office of the Retirement Savings Lost and Found or to an IRA established by the Secretary of the Treasury on behalf of the individual. 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.
• Require the Secretary of Labor to provide guidance on investment options for accounts transferred directly to the Office of the Retirement Savings Lost and Found or to IRAs. Accounts that are transferred can be invested in target date or lifecycle funds, or other investment options that are designed to preserve principal and provide a reasonable rate of return.

The Retirement Savings Lost and Found Act would establish new criteria that plan sponsors could use to satisfy their obligation to search for “missing participants.” The bill defines a missing participant as someone who cannot be found using the new search criteria.

• The search criteria in the bill would amend the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code and would replace existing guidance on searching for missing participants. The current Labor Department guidance on searching for missing participants in terminated retirement savings plans has four required steps.³   Employers who follow the guidance have a “safe harbor” and are presumed to have performed their fiduciary duties to find missing participants. Current Internal Revenue Service guidance on searching for participants who are owed a benefit at age 70½ has three required steps.⁴
• The search criteria in the Retirement Savings Lost and Found Act, if adopted, would eliminate several of the search steps that are currently required to locate missing participants. This chart compares the current Labor Department and IRS search criteria with the criteria proposed in the Retirement Savings Lost and Found Act.

Read our blog post about the bill.

1)  The circumstances are (1) when a participant has left employment and cannot be found and (2) when a participant did not tell the plan where to send the money in the account. These forced transfers must be specifically permitted under the rules of the participant’s plan.

2) 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.

3) Labor Department Field Assistance Bulletin 2014-01: Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans.

4) IRS – Memorandum for Employee Plans Examiners: Missing Participants and Beneficiaries and Required Minimum Distributions: TE/GE-04-1017-003.