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In the United States, the problem of missing participants and lost pensions is huge. Although there is no precise estimate of the size of the problem, the PBGC reports that more than 80,000 workers have unclaimed pensions worth more than $300 million and Terry Dunne of Millennium Trust Company has made “an educated guess based on government and industry data that more than 900,000 workers lose track of 401k-style, defined-contribution plans each year.” Anecdotally, Kyle Garrett posted on July 8, 2020, that in his 15 years at the Pension Rights Center, the most frequent question he has received from callers is, “I worked for a company for a number of years and now that company is gone and I can’t find my retirement plan. What can I do?” To further illustrate the potential size of the problem, the General Accountability Office (GAO) reported that from 2004 through 2013, separated employees left more than 16 million accounts of $5,000 or less in workplace plans with an aggregate value of $8.5 billion.
The problem of missing participants and lost pensions is not new. Indeed, the first law review article on the subject was written almost two decades ago. Nevertheless, policymakers and commentators have devoted increasing attention to the issue in recent years. For example, the Advisory Committee on Tax Exempt and Government Entities addressed the issue in its 2018 Report of Recommendations, the Advisory Council on Employee Welfare and Pension Benefits issued reports to the Secretary of Labor on the subject in 2013 and 2019, and the GAO published three reports on the subject between 2014 and 2019. The three principal federal agencies regulating employee benefits, the Department of Labor (DOL), the Department of Treasury, and the Pension Benefit Guaranty Corporation (PBGC), have all been studying the problem and issuing guidance in recent years, and members of Congress have also proposed legislation to address the problem. Moreover, the DOL has identified missing participants as an enforcement priority.
In 2019, Susan Harthill, Elizabeth Goldberg and Oluwaseun (Shay) Familoni of Morgan, Lewis & Bockius published an article on this pressing subject in this Review, and Anna Marie Tabor, Director of the Pension Action Center at the University of Massachusetts Boston, has an article on the subject forthcoming in the Dickinson Law Review. The 2019 Harthill, Goldberg, and Familoni article focused on the fiduciary issues raised by missing participants, particularly with respect to defined benefit plans, while the Tabor article focuses on 401(k) plan participants. This article takes a broader look at the problem of missing participants and lost pensions.
This article begins by providing a broad overview of the problem of missing participants and lost pensions. It then discusses recent regulatory guidance that has been issued by the DOL and the IRS. Finally, it turns to potential solutions to this distressing concern. Specifically, it first considers three potential solutions that focus on communication and improving the chance of participants finding out about their lost pensions: (1) reinstating the IRS letter forwarding program; (2) improving social security notifications; and (3) instituting a national registry for lost pensions. It then analyzes three potential solutions that focus on the use of retirement funds: (1) forfeiture to state unclaimed property funds; (2) forced transfers to IRAs and auto-portability; and (3) transfers to a central fund.
Publication Date
2021
Book Title
New York University Review of Employee Benefits and Executive Compensation
Publisher
LexisNexis Matthew Bender
City
New York
ISBN
9781663305749
Keywords
missing participant, lost pension, unclaimed
Disciplines
Labor and Employment Law | Law | Retirement Security Law
Recommended Citation
Moore, Kathryn L., "Lost and Found: Reuniting Missing Participants and Lost Pensions" (2021). Law Faculty Books and Chapters. 42.
https://uknowledge.uky.edu/lawfac_book/42
Notes
Moore, Kathryn L. “Lost and Found: Reuniting Missing Participants and Lost Pensions.” In New York University Review of Employee Benefits and Executive Compensation, edited by David Pratt, §6.01-6.06. New York: LexisNexis Matthew Bender, 2021.