Get a job. Keep it for a few years. Move on. Then the 401(k) retirement plan you’ve paid into gets lost in the shuffle.
A bipartisan bill aims to establish a national “lost-and-found” for the millions in retirement plans left with former employers as more Americans skip from job to job.
Sen. Elizabeth Warren, D-Mass., and Sen. Steve Daines, R-Mont., introduced the “Retirement Savings Lost and Found Act” last month to “protect hard-working Americans’ retirement savings.”
“Working Americans are losing hard-earned dollars up until the time when they need it most—their retirement,” Daines said upon introduction of the bill, according to 401kspecialistmag.com. “When an employee leaves a job, it’s often hard for them to keep track of their retirement accounts during these transitional times. This is a commonsense approach that will empower individuals to take control of their retirement future.”
“Our country faces a retirement crisis, and it’s important that all workers have a real chance to build retirement security,” he added. “But today, millions of Americans are losing critical savings when they move between jobs. This bipartisan bill will help protect the retirement savings employees have earned.”
According to the text of the bill, the shift from defined benefit plans to 401(k)s has made it harder for workers to track, manage and consolidate multiple retirement accounts as they move from job to job.
The proposed legislation cites a 2014 Government Accountability Office report that found many Americans leave their jobs each year without telling employers with what to do with their retirement accounts.
The many inactive retirement accounts can be blamed on an overall increase of 401(k) plans, it said, and the frequency of 401(k) auto enrollments permitted by the Pension Protection Act of 2006, and shorter job tenures among younger workers.
The Senate bill also pointed to a Teachers Insurance and Annuity Association study that discovered a third of Americans have left one or more accounts with a previous employers, resulting in the loss of tens of millions.
The act would use data employers are already required to report to create a national, online, lost and found for Americans’ retirement accounts. So with a click of a button, any worker can locate all of their former employer-sponsored 401(k) plans.
It would also allows employers to more easily invest abandoned accounts into target date funds rather than money-market funds. “Orphaned” funds with balances less than $1,000 could also be transferred to Treasury securities, such as the myRA, so that balances earn a positive return.
The bill is supported by AARP and the Pension Rights Center.
The bill is one of several efforts to fix the retirement rollover problem, according to Bloomberg, which reported others have called for creating a “retirement clearinghouse” to park 401(k) balances while workers are between jobs.
Then when they get a new job, they can put their old balances into their new 401(k).
For Warren, a “Retirement Savings Lost and Found” is a baby step toward a larger goal she explained in a speech at the New America Foundation in May. Retirement plans should be available to everyone, she said, including the part-timers, gig workers and many other workers who have no easy way to save at work.
Several states -- including Connecticut, California, Illinois, Maryland, and Oregon -- have offered their own solution to this problem: State-sanctioned retirement plans that follow workers from job to job. In her speech last month, Warren suggested unions or other organizations might hire private firms to set up portable, high-quality retirement plans.
“Our country faces a retirement crisis, and it’s important that all workers have a real chance to build retirement security,” Warren said. “But today, millions of Americans are losing critical savings when they move between jobs.
“This bipartisan bill will help protect the retirement savings employees have earned.”
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