July 30, 2020
Pension, 401k Registry Bill Resurfaces
When COVID-19 throws people out of work, their chances of retiring comfortably can deteriorate rapidly. What better time to find a new way to help?
A perennial proposal just reintroduced in Congress would do some good: establish an online database of employer retirement plans so workers and retirees can locate old pensions and 401(k) accounts.
Workers are increasingly responsible for making sure they have enough money to retire. But moving from job to job is now the norm – the one-employer career is a distant memory – and pensions get left behind and 401(k)s fall by the wayside. People who try to find old plans often can’t locate employers that have changed names, merged, relocated, or terminated a plan.
The primary way to find retirement plans now is through the lost property records kept by each state. But Anna-Marie Tabor, director of the Pension Action Center in Boston, which recovers lost pensions and 401(k)s for the center’s clients, said billions more in unclaimed funds can’t be located in the state records, because employers are not required to turn over plan information to the states. Also, 401(k)s are hard to find since many employers transfer small accounts to third-party IRAs without the account owner’s awareness.
Tabor argues in the Journal of Aging and Social Policy that the COVID-19 recession brings new urgency to passing the proposed Retirement Savings Lost and Found Act of 2020, especially for low-income workers hit hardest by layoffs and older workers who are running out of time to repair their finances prior to retiring.
“Connecting people with money they’ve already earned is an easy and inexpensive way to support the economic recovery,” she said.
Some advocates were hoping the national registry would be part of a follow-up this year to the SECURE Act of 2019, which addressed an array of retirement plan issues. The bill has bipartisan sponsors in both the House and Senate and wholehearted support from groups ranging from AARP to the ERISA Industry Committee of retirement plan sponsors. But prospects for a registry seem low in a year in which Congress’ priorities include a recession and a pandemic.
The legislation calls for consolidating the information online that employers already are required to report to the U.S. Treasury Department. Former employees would be able to look up misplaced pension and retirement accounts and find accurate contact information for a former employer.
Roughly half of working-age households don’t have enough for retirement. Locating some long-lost money would help.
Read more blog posts in our ongoing coverage of COVID-19.
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It probably has to do with the lobbying arm of the investment community more than any other issue; the old K street crowd for sure.