03.01.18

Daines, Warren Introduce Bill to Upgrade America’s Retirement Saving System

Americans are already $7.7 trillion short on what they need for retirement

U.S. SENATE – United States Senators Steve Daines (R-MT) and Elizabeth Warren (D-MA) introduced the bipartisan Retirement Savings Lost and Found Act to modernize the retirement system to better protect Americans’ hard earned savings. The proliferation of small accounts is costing Americans tens of billions of dollars every year in lost savings because of cash-outs and redundant fees, and that doesn’t include lost savings from missing accounts.

“Montanans should not have to worry about losing their hard-earned dollars when they change jobs,” said Daines. “This bipartisan bill will empower individuals to take control of their retirement future.” 

“Everyone should be able to build financial security and retire with dignity – yet millions of Americans are losing critical savings when they move between jobs,” said Warren. “This bipartisan bill upgrades our retirement system to make it easier for Americans to keep the retirement savings they’ve worked for and earned and easier for employers to connect their former employees with the accounts they have left behind.”

Background:

As employers have shifted from defined benefit pensions to individualized retirement plans such as 401(k)s, 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. A 2014 Government Accountability Office (GAO) report found that many Americans leave their jobs each year without giving their employers directions with what to do with their retirement accounts. A survey by the investment management firm TIAA found that 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 increase in employers’ use of auto enrollment since the passage of the 2006 Pension Protection Act has also resulted in a significant increase in the number of small accounts – sometimes without employees even realizing they have one. Many of these accounts are lost or neglected. Shorter job tenures among younger workers has contributed to multiple inactive accounts for individuals as well.

The Retirement Savings Lost and Found Act uses the data employers are already required to report to create a national, online, lost and found for Americans' retirement accounts. This means that with the click of a button, any worker can locate all of his or her former employer-sponsored retirement accounts. 

The Retirement Savings Lost and Found Act also:

  • Allows employers to more easily invest abandoned accounts into target date funds rather than money-market funds. According to the GAO, $1,000 in a target date account was projected to grow to $2,700 over thirty-years whereas a $1,000 in a money market account was reduced to $0.
  • Allows for uncashed checks of less than $1,000 to be transferred to Treasury securities, so that plans for unallocated individuals can still earn a return, unlike plans that currently must remain with cash balances.
  • Clarifies the responsibilities of employers and plan administrators to help former employees locate their missing plans.

The text of the senators' bill is available HERE.

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