Missing Your 401(k) Check? The Government Wants to Help

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By Kristen Ricaurte Knebel

Uncle Sam wants to reunite workers with money they may have left behind in retirement plans over the years.

When workers change jobs, they leave behind more than colleagues and empty desks. They can also leave behind money in their pension or 401(k). Thirty percent of workers left behind money in a 401(k) when they left their jobs, TIAA reported in 2015.

This money can sit for years, until workers hit the age they must start taking distributions from retirement plans. In general, the tax code requires retirement plans make distributions to participants by the later of April 1 following the year an employee reaches age 70 1/2 or the year they retire. Some retirement plans actually require the distributions begin sooner.

The three government agencies regulating retirement plans—the Internal Revenue Service, Pension Benefit Guaranty Corporation, and Labor Department—have all made recent strides to help employers and workers match up money that was left behind.

The PBGC is currently looking for 43,000 missing participants who are collectively owed $130 million, the agency told Bloomberg Law Oct. 27.

Some members of Congress have also tried to address this issue. In 2016, Sen. Elizabeth Warren (D-Mass.) introduced the Retirement Savings Lost and Found Act. The legislation proposed using data employers already report to the Treasury Department to create a national online database. The legislation never gained traction.

Warren may soon reintroduce this legislation, Will Hansen, senior vice president of retirement policy for the ERISA Industry Committee, told Bloomberg Law Oct. 30. ERIC advocates for large employer plan sponsors. Hansen said his group has been working with Warren and Sen. Steve Daines (R-Mont.) to “strengthen” the legislative language.

Agency Initiatives

For its part, the PBGC is looking to expand its missing participants game into the 401(k) space. The agency that insures America’s private pension plans already has a database to help participants in traditional pension plans search for unclaimed money.

The PBGC has a pending final rule at the Office of Management and Budget that would extend its program to many more missing participants. Under the proposed rule, which was issued in September 2016, the PBGC would also offer a similar program to individual account defined contribution plans, such as 401(k) and profit-sharing plans. Such plans would have the option of transferring benefits to the PBGC.

The DOL has been running a program looking into large defined benefit plans, including some from Fortune 500 companies, that have failed to locate and pay terminated vested participants who are retirement-eligible. Terminated vested participants generally are employees who worked long enough to vest into a pension plan, but aren’t accruing pension benefits.

The investigation began when the DOL’s Employee Benefits Security Administration noticed a flurry of phone calls on Social Security day every month. The calls were from participants who said they received statements saying they may have pensions, but they weren’t getting them. The program started in EBSA’s Philadelphia office and has since expanded. In fiscal year 2017, the DOL recovered $174.9 million for 4,187 participants, according to agency data.

EBSA’s Chicago Regional office adopted a missing participant regional initiative in fiscal year 2017. That office has been working with the PBGC on this issue and has recovered $6,264,048 for 133 participants in FY 2017, according to DOL data.

While workers may be pleasantly surprised if they find they have unclaimed pensions, employer advocates have some concerns about DOL’s current enforcement positions in this area.

On Oct. 3, the American Benefits Council, which advocates for large employers on employer benefits policy issues, asked EBSA for “comprehensive guidance on plan fiduciary responsibilities with respect to unresponsive and missing participants.” The group also accused the DOL of taking “ad hoc enforcement positions” when approaching plan sponsors about missing participants.

While it doesn’t have an official program aimed at finding missing participants, the IRS issued field guidance Oct. 23 to examiners telling them not to give retirement plan sponsors grief for not meeting minimum distribution requirements if they’ve taken certain steps to reunite workers with retirement plan funds.

In order to not receive scrutiny from IRS investigators, plan sponsors have to look for participants owed money through plan records and publicly-available records or directories, the guidance said. Plans also should try finding workers with commercial locator services, credit reporting agencies, and contact via certified mail, it said.

The DOL declined Bloomberg Law’s requests for comment Oct. 30.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at kknebel@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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