If you lose track of your retirement savings account that you had early in your career, how easy it is to find it depends largely on the type of savings plan.
If you’re looking for an older IRA, a search in the National Association of Unclaimed Property Administrators (NAUPA) may help you keep track of that account. But a 401 (k)? If you don’t know the financial institution that owns it, you’re much less likely to find it.
“It’s absolutely easy to find an IRA for now compared to a 401 (k),” said Allen Mayer, who recently worked on a major amendment to the state’s unclaimed property law as Chief of Staff of the Illinois Treasury Secretary. Said. “In fact, if I had to find one, I don’t even know where to start. [a 401(k)].. “
The difference lies in the federal regulations governing retirement accounts. The Employee Retirement Income Security Act (ERISA) outlines the financial protection of employer-sponsored retirement plans, and in particular, these protections are for non-beneficiaries designated by the holding institution 401. (K) Effectively prevent sending checks for retirement accounts. It’s all working, but if the account holder isn’t found, those non-monetized checks are just sitting there.
In contrast, ERISA No Prevents the holding company from reporting or sending unmonetized IRA checks to state unclaimed real estate managers. Administrators can track account owners, or at least keep a record of their money, and easily find them in an unclaimed property search.
Total unclaimed retirement savings
Approximately $ 100 million in retirement checks have not been monetized, according to the 2019 Ministry of Labor Report (DOL) Every year. This is based on the fact that in 2017, about 5 million checks were issued by the Defined Contribution Pension, and on average about 4.5% (or 225,000) were not monetized.
“Based on the councilor’s experience, testimony, and conversations with record holders … the total amount of non-monetized retirement checks can easily exceed $ 500 million in total.”
Evidence shows that the majority of checks are less than $ 1,000, but reports show that one-fiftieth can be worth more than $ 20,000.
Fix ERISA problem
Unclaimed real estate managers are advocating DOL granting a safe harbor, which allows unmonetized checks to be voluntarily transferred to the state’s unclaimed real estate program. Plan trustees are not currently doing this in their 401 (k) checks because they are worried that they may be sued by beneficiaries under ERISA. NAUPA and the state treasurer believe that more non-monetized retirement checks will be reported to the state by being protected from legal action. And in fact, the DOL report agreed with this assessment.
Eventually, it will cause more people to reunite with their retirement savings. In addition to making it easier for someone to find savings, NAUPA director Jeremy Dawson said that in some states, unclaimed real estate managers record the names of unclaimed retirement checks in their state’s tax records. Said that it can be cross-referenced with. If the current address is displayed, the check will be sent to the recipient. No billing required.
Over the past three years, NAUPA has stepped up its advocacy in this regard, and Mr Dawson said the association hopes to work with Secretary of Labor Marty Walsh to draft new rules soon.
For Meyer, granting a safe harbor takes full advantage of the tools already in place to reunite people with retirement savings.
“I don’t think it’s a solution to use it to create another federal bureaucracy when we already have a state-level solution,” he said.