U.S. Senators Elizabeth Warren, D-Massachusetts, and Steve Daines, R-Montana, have introduced the Retirement Savings Lost and Found Act, aimed at solving some of the issues Americans face when trying to manage and organize multiple defined contribution (DC) plan accounts.
According to the senators, the increasing prevalence of DC plans means workers have become responsible for tracking, managing, and consolidating multiple retirement accounts as they move from job to job.
“But moving accounts from job to job is not easy,” the senators warn, observing that Government Accountability Office (GAO) reporting has found that many Americans leave their jobs each year without giving their employers directions with what to do with their retirement accounts. The senators also cite a “recent survey by the investment management firm TIAA that found 30% of Americans have left an account at their previous employer, resulting in tens of millions of Americans with one neglected account and millions more with two or more accounts.”
The senators argue their bill would help to address some of the unintended consequences that have arisen alongside the otherwise overwhelmingly positive impacts of automatic enrollment into DC plans, as permitted by the Pension Protection Act of 2006. As has been widely reported, auto-enrollment tends to result in more people in an employee population starting to save, but it also means more novice investors will gain accounts without taking active ownership. In rare cases, employees may not even realize they have a retirement account at a given employer, for example if they are part of a very large plan that lacks a solid communication strategy.
According to Senators Daines and Warren, the new proposal “uses the data employers are already required to report to create a national, online, lost and found tool for Americans’ retirement accounts. This means that with the click of a button, any worker can locate all of their former employer-sponsored retirement accounts. “
The senators say the Retirement Savings Lost and Found Act also would allow employers to more easily invest abandoned accounts into target-date funds rather than in capital preservation options that offer little chance of growth. In addition, truly “orphaned funds” with balances less than $1,000 will be transferred to Treasury securities, including in the myRA format, “so that balances earn a positive return.”
Text of the proposal shows the underlying mechanism of the lost and found would allow those who believe they own a missing account to view contact information for the plan administrator currently overseeing the DC plan in question.
AARP and the Pension Rights Center have both voiced support for the proposal, according to the senators. The full text of the bill is here.