By Jane Smith
Originally introduced in 2016 by Senators Elizabeth Warren (D–MA) and Steve Daines (R–MT), the Retirement Savings Lost and Found Act of 2016 (S. 3078) would have been a great help to the many retirees who are now searching for their earned retirement benefits. The Pension Rights Center wholeheartedly supported that bill. Unfortunately, a new version of the bill introduced in 2018 (S. 2474) added provisions that would prevent many other retirees from receiving their pensions. That is because the new version of the bill would put a stop to ongoing Labor Department investigations into pension plans that have made little or no effort to locate retirees who are owed benefits. As a result of these investigations, retirees received $326.7 million in benefits in fiscal year 2017.
The bill would establish an online pension plan registry in a new Office of Lost and Found to help retirees find the pension plans that are holding their benefits when their former employers have moved, changed names or combined with other employers. Employers no longer operating under their old names or in their old locations can be difficult, if not impossible, to locate. The Pension Rights Center has long advocated for a plan registry.
Another good feature of the bill is the reporting of “forced transfers.” These are small balances that plans can transfer to IRA accounts when participants cannot be located. Under the bill forced transfers would be reported to the Office of Lost and Found so that participants who later look for their benefits should be able to find them.
The beneficial parts of the bill are offset by provisions included at the urging of large companies that would allow them to make only minimal searches for retirees who are owed benefits under ongoing pension plans. The bill says that if plans are unable to contact retirees by sending letters to their last known addresses, they only have to undertake one other type of search. This can be as little as looking at the employers’ address records.
The new bill’s search criteria are far less comprehensive than current Labor Department and Pension Benefit Guaranty Corporation rules for searches for participants whose plans have terminated. They also require fewer efforts by plans to locate participants required to take minimum distributions from retirement plans at age 70 ½ than current Internal Revenue Service guidance. See this chart for a comparison of the bill’s search criteria with current government agency requirements.
Pension plans typically pay benefits at retirement age. When employees leave a plan it may be decades before they apply for their pensions. During that period, the pension plan can change names, move, be merged into another plan, or terminate. Or the employee may move or marry, divorce, be widowed, or otherwise change names. As a result many retirees are finding it very difficult to locate their lost plans while these plans and others are holding onto millions of dollars owed to missing participants. The Government Accountability Office (GAO) reported that from 2004 through 2013 over 25 million participants in workplace plans separated from employment and left at least one retirement account behind. Helping retirees find their lost pension plans is one of the biggest challenges faced by federally-funded regional pension counseling projects and government agencies.
Starting several years ago, the Labor Department’s Philadelphia Regional Office began auditing large pension plans to determine the extent to which they were retaining unpaid pension benefits without making more than perfunctory searches to locate the participants for payment. According to reports, what they discovered was that some plan sponsors have no procedures to ensure timely payment of benefits and other plan sponsors who have those procedures do not follow them. The investigators also found many errors in plan recordkeeping. By conducting searches, Labor Department investigators were able to restore many millions of dollars in benefits to retirees in ongoing plans.
If the Warren-Daines bill is enacted in its current form, not only could the Labor Department investigations into ongoing plans be halted, but plans may be able to replace the current
Labor Department and IRS standards for locating missing participants with the inadequate search criteria in this bill. As a result, many more retirees and their beneficiaries will not receive their earned benefits and will have a far less secure retirement.
The plan registry and forced transfer provisions of the Retirement Savings Lost and Found Act of 2018 should be enacted. But the bill’s minimal search criteria for finding missing participants should be dropped.