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Protecting Retirement Savings

Rep. Luke Messer (R-IN), Rep. Suzanne Bonamici (D-OR), and Rep. Richard Neal (D-MA) just introduced the bipartisan Retirement Savings Lost and Found Act to protect Americans’ retirement savings.

The U.S. job market is changing and Americans move jobs more often today than ever before. Some researchers predict today's youngest workers will hold twelve to fifteen jobs over their lifetime. And with significant changes to our workforce, come significant changes in how Americans plan for retirement. As employers have shifted from away from defined benefit pensions and into individualized retirement plans such as 401(k)s, workers have become responsible for managing these accounts as they change jobs.

However, it can be difficult for employees to keep track of these accounts during job transitions. 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 Employee Retirement Income Security Act (ERISA) allows employers to transfer former employees’ “orphaned” retirement accounts off their books and into Individual Retirement Accounts (IRAs). Unfortunately, because of how these transferred accounts must be invested, the fees on these IRAs can outstrip the earnings—meaning that employees are actually losing money on these accounts. In a recent report, the Government Accountability Office (GAO) found that an unclaimed IRA with a $1,000 balance could be reduced to $0 in 9 years because of investment fees.

“We must protect these employee retirement accounts in a responsible way that ensures they aren’t losing money,” Congressman Messer said. “The Retirement Savings Lost and Found Act will ensure that their money is invested wisely and that they’re able to easily locate these accounts whenever they need to.”

The bill uses the data employers are already required to report to create a national, online, lost and found for Americans' retirement accounts. This means that any worker can locate all of their former employer-sponsored retirement accounts in a simple online portal.

“Protecting low and middle-income workers retirement savings remains one of my top legislative priorities. Far too many Americans are putting their retirement at risk because a job change often results in a loss of savings. I believe this bipartisan bill can dramatically improve their post-employment years and help avoid a retirement crisis. By making it easier for workers to save, millions of Americans will enjoy their golden years secure and content,” said Congressman Neal, a senior member of the House Ways and Means Committee.

H.R. 5805 allows employers to more easily invest abandoned accounts into a target date retirement account rather than a money market fund. According to the GAO, if a $1,000 account were invested into a target date account it could grow to $2,700 over thirty years; whereas a $1,000 account in a money market fund would be reduced to $0.

“Starting a new job shouldn’t put workers at risk of losing their hard-earned retirement savings,” said Congresswoman Bonamici, a member of the House Committee on Education and the Workforce. “This bipartisan legislation will help working families be more secure when they retire by providing the tools necessary to keep track of their retirement savings when they move from job to job.”

The bill is supported by AARP and the Pension Rights Center. The text of the bill is available here and a fact sheet is available here.

Posted on July 20, 2016.