Missing Participants and Beneficiaries From Private-Sector Pension Plans

Abstract

This article examines the problem of missing and nonresponsive participants and beneficiaries from defined-benefit (DB) and especially defined-contribution (DC) pension plans, mainly in the private (for profit) sector of the United States. It focuses on the current search requirements of the three government agencies involved in finding missing participants and beneficiaries: the Pension Benefit Guaranty Corporation (PBGC), the Department of Labor (DOL) and its Employee Benefit Services Administration (EBSA), and the Internal Revenue Service (IRS). The article also reviews the efforts of the Social Security Administration (SSA) in this area. It then reviews proposed legislation, the Retirement Savings Lost and Found Act of 2020 (now S. 1730; RSLFA). The issue of missing participants and beneficiaries often becomes critical when an employer goes out of business or for some other reason stops sponsoring a pension plan. The missing participants are owed their earned retirement benefits. They, not the employer, own them.

Keywords

missing participants PBGC DOL IRS missing participants pension plans

Background

Pension plans are generally classified as either defined-benefit or defined-contribution. In a DB plan, the participant (employee) earns a lifetime pension benefit that is the product of his or her “final income” (typically on average of the last 3 to 5 years), the number of years of participation (in months), and a pension factor (typically 1.0 or 1.5).

Private-sector DB pension plans were at one time considered the standard pension plan in the United States although they only covered about 50% of the workforce. However, as evidenced in Table 1, after peaking about 1985 at 170,172 plans, they had declined to 46,869 by 2018.

Table 1.

Number of Private-Sector Pension Plans, Total Participants and Active Participants, Selected Years 1980–2018 (Participants in Thousands).

Year	Number of plans		Total participants		Active participants
Year	Defined benefit	Defined contribution	Defined benefit	Defined contribution	Defined benefit	Defined contribution
1980	148,096	340,806	37,979	19,924	30,100	18,886
1985	170,172	461,963	39,692	34,973	28,895	33,168
1990	113,062	599,245	38,832	38,091	26,205	35,340
1995	69,492	623,912	39,736	47,716	23,395	42,203
2000	48,773	686,878	41,613	61,716	22,218	50,874
2005	47,614	631,481	41,925	75,481	20,310	62,355
2010	46,543	654,469	41,423	88,301	17,172	73,429
2015	45,674	648,225	37,286	97,572	14,405	78,130
2016	46,229	656,241	36,028	100,152	13,866	79,985
2017	46,698	662,829	34,960	102,440	13,475	81,150
2018	46,869	675,007	33,967	105,846	13,073	83,376

Source. U.S. Department of Labor, Employee Benefits Security Administration (September 2019). Private pension plan bulletin historical tables and graphs 1975 - 2018. Tables E1, E4 and E 7. Retrieved from https://www.dol.gov/sites/dolgov/files/ebsa....January2021

In a defined-contribution plan, the participant makes an “elective deferral” (employee contribution), which—in the private sector—is typically matched by an employer contribution. The pension benefit does not last for life. Rather, it is limited to the amount of money in the fund (contributions plus earnings minus expenses) that may be paid in a lump sum or amortized with an insurance company, which converts it to a lifetime benefit (at a considerable expense).

Actually, the above understates the extent of the decline. A large number of DB plans are “frozen” (closed to new members and/or benefit accruals ceased).

In contrast, during the period 1980–2018, private-sector defined-contribution plans grew from 340,806 to 675,007 (Table 1).

Over the same period, total participants in DB plans declined from 38.0 million to 34.0 million while the number in DC plans grew from 19.9 million to 105.8 million. More interesting, the number of active participants, for whom the plan sponsor (employer) makes contributions, declined from 30.1 million to 13.1 for DB plans while it increased from 18.9 million to 83.4 million in DC plans.

In the private sector, most DC plans are Section 401(k) plans. In the public (governmental) sector, they are mainly 403(b) or 457(b) plans or “grandfathered” 401(k) plans established prior to May 5, 1986, and in continuous operation since. And in the third (not-for-profit) sector, they can be any of the three.

In the private sector, Section 401(k) plans with an employer matching contribution increasingly serve as the employer’s only or main retirement-income plan. That shifts much of the cost and all of the longevity risk from the employer to the participant.

In the public sector, DC plans, generally without an employer matching contribution, augment often generous defined-benefit pension plans.

This article will focus primarily on the private sector for the simple reason that is where all of the attention to missing participants and beneficiaries has arisen so far, and we therefore have the most information and data on the subject at this time. However, missing participants and beneficiaries in the public and the not-for-profit sectors must also be a problem that will likely surface in the not-too-distant future. But, that’s another article.

Required Minimum Distributions

Participants cannot keep retirement funds in their defined-contribution pension plans indefinitely. Until recently, they had to start taking required minimum distributions (RMD) when they attain age 70½ (unless still working). However, the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became part of the Further Consolidated Appropriations Act of 2020 (Pub. L. 116–94), and signed into law December 20, 2019, changed that. If the participant’s 70^th birthday is July 1, 2019, or later, withdrawals do not have to begin until age 72 (Internal Revenue Service, 2020a).

Withdrawals can be made penalty free any time after age 59½. If made before that age, there is a 10% excise tax (penalty) on the amount withdrawn.

The RMD rules apply to 401(k), 403(b), and 457(b) plans, profit-sharing plans and other defined-contribution arrangements, and all types of IRAs (except Roth IRAs).

Missing Participants and Employer Response

Attention to the missing participant and beneficiary problem is a relatively recent phenomenon. Until a few years ago, participants missing from a defined-benefit pension plan (usually vested former employees) worked to the advantage of the sponsor. To the extent that they did not file a claim for retirement benefits, the money stayed in the pension fund and thereby offset some of the cost of those who did receive benefits. That improved the plan’s funded ratio (assets ÷ liabilities) and reduced the employer’s annual required contributions (ARC). Thus, there was little incentive for the employer to find missing participants and beneficiaries.

When participants and beneficiaries went missing from defined-contribution plans, there was no obvious advantage to the employer. The employee’s elective deferral and the employer’s matching contribution had already been made, and the money just sat in the trust fund. It belonged to the participant, most commonly vested former employees, not the employer.

DC plans are by definition always fully funded. However, while the participant is always fully vested in his or her own contributions, when he or she becomes vested in the employer’s contribution depends on the provisions of the plan. The employer can choose between “cliff vesting” (fully vested after 3 years of participation) or “graded vesting” (20% vested after 1 year, then increasing by 20% per year until reaching 100% in year six) (Internal Revenue Service, 2020b).

Why Participants Go Missing

There are three main reasons why participants and beneficiaries go missing: (1) change of residence, (2) change of jobs, and (3) mortality (they die). They will be discussed in turn.

Change of address. American society is highly mobile and it always has been. The average individual will move almost 12 times over a lifetime. In any given year, almost one in six individuals will relocate. They often do not leave a forwarding address with former employers, especially if the employer is from two or more jobs ago.

Job change. Americans on average will change jobs 7.4 times over the course of a 40-year career. It is estimated that 9.5 to 11.3 million participants in defined-contribution plan will change jobs annually. This is often accompanied with a change of address.

Mortality. An average of 16% of pension plan participants will die between the ages of 40 and 65. One out of six do not arrange their affairs properly. They often leave their beneficiaries with inadequate documentation needed to locate retirement savings accounts (Testimony of J. Spencer Williams, 2013).

How Many Missing Participants and Beneficiaries Are There?

We do not really know how many missing participants and beneficiaries there are. However, there are a lot of them.

The Pension Protection Act of 2006 (Pub. L. 109–280; PPA) allowed employers to automatically enroll employees in a DC pension plan (Joffe, 2006). That significantly added to the number of missing participants. TIAA (Teachers Insurance and Annuity Association) estimates that 30% of employees have left a retirement account behind. That implies that, of the Civilian Labor Force of about 160 million in 2020, there are 48 million missing participants and beneficiaries (author’s calculations). They include 43% of Gen X (b. 1961–1979; now age 42–56) and 35% of Gen Y (b. 1980–1994; now age 27–41) (Warren, n. d.). This problem will continue to grow as Gen Z (b. 1997–2012; now age 9–24) continues to enter the workforce. Lots of accounts are being created with little involvement or interest from participants, especially young participants.

The Boston Research Technologies and the Retirement Clearinghouse (RCH) found that (1) 11% of accounts of former vested employees had “stale addresses,” (2) one out of five job changes resulted in a missing participant, (3) the probability of locating a missing participant using a former address was 67%, (4) 9% of participants would not verify their current address if asked by a former employer, and (5) one-third of participants contacted learned of a retirement account they had with a former employer they did not know they had (Boston Research Technologies and Retirement Clearinghouse, 2018). The Retirement Clearinghouse estimates that there are a minimum of three million missing-participant accounts. That number will continue to grow.

The Pension Benefit Guaranty Corporation reports that, as of 2018, 80,000 individuals were owed US$300 million single-employer pension benefits (Pension Benefit Guaranty Corporation, 2018). Table 2 reports the 10 states with the highest number of unclaimed pensions and their total and average US dollar amounts for single-employer pension plans and relates their total to the nationwide estimate just mentioned. The 10 states for which we have data represent half (49.3%) of the missing participants and three-fourths (73.7%) of the US dollars owed to them.

Table 2.

Ten States with Highest Number of Unclaimed Pensions in 2018 and Nationwide Estimate.

State	People	$ millions	Average $ per participant
California	8458	40.6	4800
New York	5601	40.2	7177
Texas	5816	20.5	3593
Florida	3840	21.6	5625
Illinois	3359	20.8	6192
Ohio	2739	16.7	6097
New Jersey	2727	14.1	5171
Pennsylvannia	2453	17.3	7053
North Carolina	2366	14.1	5959
Michigan	2118	15.1	7129
10-state totals/average	39,477	221.0	5598
Nationwide estimate	80,000	300.0	3750
10 states as a % of total	49.3	73.7	—

Source. Pension Benefits Guaranty Corporation. (2018). State-by-state pension-plan information. Retrieve from https://www.pbgc.gov/about/budget-budget-and-planning/statebystate

We do not have data on the number of missing participants or the US dollar amounts owed for the larger problem of multiemployer pension plans. However, that is where most of the legislative and administrative attention has been directed.

Abandoned Retirement Accounts

In a related and somewhat overlapping matter, many (mostly defined-contribution) retirement savings accounts are abandoned. We do not really know how many abandoned accounts there are or the US dollar amounts involved. However, Mukherjee reports having useable data from 13 states (including the large states of California, Texas, Florida, and Ohio) going back to the 1980s. In the 13-state sample, there were 36,500 retirement-related accounts totaling US$18 million in assets. She extrapolates these numbers to the United States and estimates that there were almost 70,000 unclaimed accounts with US$38 million in assets as of 2016 (Mukherjee, 2020). That comes to an average unclaimed account of US$543 (author’s calculation).

Retirement assets are deemed “unclaimed” if the owner has not taken RMDs by age 70½ (now age 72) plus a “dormancy period” of 3 to 5 years.

Employers are allowed to terminate abandoned accounts with less than US$5000 after conducting a thorough search for missing participants and beneficiaries.

Composition of Participants

Table 3 reports data on the change in the composition of participants in single-employer and multiemployer pension plans for selected years 1980–2018. The comparison is revealing.

Table 3.

PBGC-Insured Plans, Participants, and Participant Status, Selected Years 1980–2018.

Single-employer program							Multiemployer program
Year	Total Insured plans	Total insured participants (millions)	Average plan size *	Active (%)	Retired (%)	Separated vested (%)	Total Insured plans	Total insured participants (millions)	Average plan size *	Active (%)	Retired (%)	Separated vested (%)
1980	95,439	27.5	288	77.6	16.0	6.4	2244	8.0	3565	75.9	17.7	6.5
1985	112,208	29.8	266	72.2	18.7	9.1	2188	8.2	3748	66.1	22.6	11.4
1990	91,899	31.6	344	68.1	19.4	12.6	1983	8.5	4286	58.6	25.2	16.2
1995	53,589	32.6	608	57.8	22.9	19.3	1879	8.6	4577	52.4	28.9	18.7
2000	35,373	34.1	964	51.9	24.4	23.7	1744	9.1	5218	51.1	30.1	18.7
2005	29,605	34.2	1152	45.7	26.6	27.6	1571	9.9	6302	45.7	30.8	23.5
2010	26,377	33.4	1256	38.5	30.9	30.6	1475	10.4	7051	39.1	33.1	27.7
2015	22,166	29.8	1344	35.8	35.7	28.6	1396	10.3	7378	36.1	35.5	28.4
2016	22,333	28.6	1281	36.4	36.0	27.6	1375	10.5	7636	36.4	35.4	28.2
2017	22,550	27.5	1220	NA	NA	NA	1374	10.6	7715	NA	NA	NA
2018	23,371	26.2	1121	NA	NA	NA	1373	10.6	7720	NA	NA	NA

*Calculated by author after rounding total insured participants.

Source. Pension Benefit Guaranty Corporation. Pension insurance data tables. Tables S-30, S-31, S-32, S-33, M-5, M-6 and M-7. Retrieved from https://www.pbgc.gov/sites/default/files/2017_pension_data_tables.pdf

Single-employer plans. As the term implies, single-employer plans are sponsored by an individual employer for its employees. They may or may not be collectively bargained with a labor organization.

For single-employer plans, total insured participants grew from 27.5 million in 1980 to 34.2 million in 2005 and then declined to 26.2 million by 2018. During the same period (1980–2018), average plan size increased from 288 to 1121. However, within the period 1980–2016 (the most recent year for which complete data are available) active participants declined from 77.6% (21.3 million) to 36.4% (10.3 million). Retirees grew from 16.0% (4.4 million) to 36.0% (10.3 million). And, separated vested participants increased from 6.4% (1.8 million) to 27.6% (8.0 million). Separated vested participants are or will be entitled to retirement benefits at the plan’s retirement age.

Multiemployer plans. Multiemployer pension plans are negotiated between a union and two or more (usually many) employers typically in the same industry.

Total participants in multiemployer plans grew steadily from 8.0 million in 1980 to 10.6 million in 2018. During the period 1980–2016, active participants declined from 75.9% (6.1 million) to 36.4% (3.8 million). Retirees grew from 17.7% (1.4 million) to 35.4% (3.7 million). And, separated vested participants grew from 6.5% (520 thousand) to 28.2% (3.0 million).

(The numbers of participants in the above text were calculated by the author after rounding).

Administrative Agencies Involved

The response to missing and nonresponsive participant and beneficiary problem has been complicated and fragmented. There are three main federal government agencies with an interest in finding missing pension-plan participants and beneficiaries. They are the Pension Benefit Guaranty Corporation, the Department of Labor’s Employee Benefits Security Administration (EBSA), and the Internal Revenue Service (IRS). The Social Security Administration is also active in an informational way. They will be discussed in turn.

Pension Benefit Guaranty Corporation

The PBGC is a federal corporation established by the Employee Retirement Income Security Act of 1974 (Pub. L. 93–406; ERISA) to insure benefits of workers and retirees. It (1) encourages the continuation and maintenance of voluntary private-sector pension plans for the benefit of participants, (2) provides for the timely and uninterrupted payment of pension benefits to which title IV of the ERISA applies (defined-benefit plans), and (3) maintain the lowest level of premiums consistent with carrying out its obligations under title IV (Pension Benefit Guaranty Corporation, 2017).

In general, the PBGC administers the pension plan termination insurance program under title IV. The process of closing out a terminated retirement plan involves the disposition of its assets. A problem is how to provide benefits to missing or nonresponsive participants.

The PBGC’s Missing Participants Program (MPP) was created by the Retirement Protection Act of 1994 (Pub. L. 103–465; RPA) to provide a way to distribute plan benefits to participants and beneficiaries who cannot be located in plans terminating in a standard termination or a distress termination. In a standard termination, the plan is sufficiently funded to pay all guaranteed benefits. In a distressed termination, the sponsor is usually in bankruptcy or is otherwise unable to pay all of its pension obligations. In the latter case, the PBGC steps in and pays retirement benefits that are owed, up to the legal limits (Pension Benefit Guaranty Corporation, 2020a).

Those limits for a plan terminating in 2021, for a participant at age 65 are US$6034 per month (US$72,408 per year) for a single straight life annuity and US$5431 per month (US$65,172 per year) for a joint and 50% survivor annuity (assuming both spouses are the same age, 65). If they are older, the maximum benefit increases and if younger it decreases. If they are of different ages, it gets complicated (Pension Benefit Guaranty Corporation, n.d. a). Few claimants are entitled to the maximum benefit for their age.

The MPP originally applied only to terminating PBGC-insured single-employer DB plans. In 2006, Congress directed the PBGC to expand its defined-benefit Missing Participants Program to include distributions from terminated defined-contribution plans and professional-service organizations with fewer than 25 participants. In general, this automatic rollover safe harbor applies to distribution of US$5000 or less for former vested employees.

The Pension Protection Act of 2006 amended the ERISA to require the PBGC to expand the program under which terminated DB plans must transfer the benefits of missing participants and beneficiaries to the PBGC’s Missing Participants Program (U.S. Government Accountability Office, 2014). The new program is mandatory for terminating PBGC-insured single-employer DB plans and PBGC-insured multiemployer plans. It is voluntary for defined-contribution plans and small professional-service DB plans with 25 or fewer participants that terminated on or after January 1, 2018 (Pension Benefit Guaranty Corporation, 2020b). Voluntary plans are urged to participate in the MPP when terminating.

The new rules permitted either (1) transferring funds to cover the cost of providing a missing participant’s benefit to the PBGC’s Missing Participants Program, in which case the PBGC would provide the benefit if the missing participant is found (called a “transferring plan”) or (2) inform the PBGC about the entity responsible for providing the benefit if the participant is found, in which case the PBGC will share that information with the participant once found (called a “notifying plan”) (Kratz, 2018).

If the plan sponsor chooses to be a transferring plan, it must transfer all missing participants to the Missing Participant Program to prevent “cherry picking.”

The PBGC charges a one-time administrative fee of US$35 for account balances of more than US$250. There is no charge for smaller accounts. There are no annual or transaction-based fees and no distribution charges once a participant is found.

In September 2016, the PBGC issued proposed regulations and in December 2017, final regulations making the program available to defined-contribution plans terminating on or after January 1, 2018. The new regulations are voluntary and do not apply to ongoing plans (The Wagner Law Group, 2018).

Department of Labor

The U.S. Department of Labor (DOL) is a large federal bureaucracy. One of its components is the Employee Benefit Security Administration. The EBSA’s objectives include protecting the employer-sponsored retirement (and other employee) benefit programs for workers and retirees (U.S. Department of Labor, n. d.). It administers and enforces the ERISA, which requires that plan fiduciaries act solely in the interest of plan participants and beneficiaries.

The DOL promulgated a “safe harbor” rule pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (Pub. L. 107–116; EGTRRA) for plans transferring balances to forced-transfer IRAs (U.S. Department of Labor, 2004).

An early effort to address the problem of missing and nonresponsive participants by the EBSA was Field Assistance Bulletin (FAB) 2004-02 (U.S. Department of Labor, 2014). The FAB was directed at (1) locating missing participants of terminated defined-contribution plans and (2) distributing account balances when a missing participant has failed to secure a distribution election.

FAB 2004-02 listed a number of steps that plan administers should take to identify missing participants of defined-contribution plans: (1) use certified mail, (2) check related plan records, (3) check with designated plan beneficiaries, and (4) use a letter-forwarding service.

FAB 2004-02 also established a rollover to an individual retirement account (IRA) or an annuity contract as the preferred distribution option.

Ten years later FAB 2004-02 was replaced by FAB 2014-01 (Miller, 2017). The new FAB took into account the fact that the IRS and the Social Security Administration had discontinued their letter-forwarding services for missing participants and beneficiaries. It also established that the DOL had codified its “safe harbor” distribution enforcement procedures. It further recognizes that, over the 10-year period, Internet search tools had become more sophisticated and powerful.

FAB 2014-01 listed a number of “required steps” that fiduciaries should take to find missing participants and beneficiaries: (1) use certified mail, (2) check related plan and employer records, (3) check with designated plan beneficiaries, and (4) use free electronic search tools.

If some participants and beneficiaries remain missing, fiduciaries should consider additional measures to the extent that the size of the account balance warrants the expense. Possible additional search steps (that may involve fees) include commercial locator services, credit reporting agencies, information brokers, and database investigations.

The other important change contained in FAB 2014-01 was the distribution of account balances of missing participants and beneficiaries. The ERISA requires that fiduciaries consider distributing missing participant balances into individual retirement plans (i.e., an individual retirement account or an annuity contract). This will continue to defer income taxation, avoid the 20% mandatory withholding requirement and avoid the additional 10% excise tax (penalty) if the participant is under the age of 59½.

Research. In 2016, DOL’s Philadelphia’s office initiated a pilot project to examine Form 5500s of defined-benefit plans to identify employers with large numbers of vested former employees who were not receiving payments or had not received a lump sum distribution. The DOL sent a certified letter to the participants, last known address of the missing participants. A lot of participants responded, many saying that they did not know that money was waiting for them. Between October 2016 and August 2017, the DOL recovered US$165 million in benefits that should have been paid (Moore, 2021). In FY 2020, EBSA investigators helped missing and unresponsive participants recover benefits with a present value of US$1.4 billion (Miller, 2020).

Following an August 2017 meeting with the EBSA and the ERISA Advisory Council, the PBGC streamlined and expanded its Missing Participant Program to include terminating defined-contribution plans, terminating multiemployer plans covered by title IV of the ERISA and terminating professional-service plans with 25 or fewer participants. The expanded program applies only to plans terminated on or after January 1, 2018 (U.S. Department of Labor, 2021).

The steps that plan sponsors should take are (1) send a certified letter to missing participants, (2) keep records on efforts to reach terminated vested participants and, during mergers and acquisitions, pass such records on to the surviving firm, (3) contact coworkers of the terminated vested participants, and (4) try calling phone numbers and cell phone numbers. If all else fails, try using a commercial locator.

Guidance. On January 12, 2021, the DOL released a three-part guidance to help fiduciaries distribute benefits to missing participants and thus meet their obligations under the ERISA. The first document is titled “Missing Participants–Best Practices for Pension Plans.” It dealt with best practices for both defined-benefit and defined-contribution pension plans. The second was “Compliance Assistance Release No. 2021-01.” It addressed terminated vested participants (former employees) in define-benefit pension plans. The third was “Field Assistance Bulletin No. 2021-01.” In it, the EBSA focused upon the participation of terminating defined-contribution plans in the PBGC’s Missing Participants Program (McCann, 2021).

In early 2021, the EBSA endorsed the use of the PBGC’s Missing Participants Program (Internal Revenue Service, n. d.). In addition, plan sponsors now have the option of transferring missing-participant funds to the PBGC which will now provide a central repository for retirement benefits from closed plans.

Internal Revenue Service

The Internal Revenue Service (IRS) oversees the compliance of retirement plans with the provisions of the Internal Revenue Code (IRC). It sets standards plans must meet to qualify for preferential tax treatment. It also collects taxes and has wide-ranging objectives related to that function (Miller, 2017). In the context of this article, it is fair to say that the IRS encourages the finding of missing participants and beneficiaries so that they can be paid their rightful retirement benefits so that they can be taxed.

The IRS issued Administrative Enforcement Guidance on October 19, 2017. The Guidance does not actually require that the plan administrator contact missing participants and beneficiaries. However, to avoid a challenge for failure to make RMDs, the plan must be able to show that it had taken the following three steps: (1) searched plan and related plan, sponsor, and publicly available records or directories for alternative contact information, (2) used any of a commercial locator service, credit reporting agency or a proprietary search tool for locating individuals, and (3) attempted to contact using USPS certified mail to the last known mailing address and through appropriate means for email addresses or phone numbers (Internal Revenue Service, 2020a).

The consequences of not taking the required minimum distributions are that the participant may have to pay a 50% excise tax on the amount not taken (U.S. Government Accountability Office, 2014). However, it is unlikely that such a draconian penalty would be applied to missing participants and beneficiaries (in my opinion).

Social Security Administration

The Internal Revenue Service provides information on unclaimed DB and DC pension benefits to the Social Security Administration. The SSA then provides information that can help participants and beneficiaries track forgotten or misplaced retirement accounts left with former employers. The SSA automatically sends a notice titled the Potential Private Retirement Benefit Information (Form SSA-L99-C1) when an individual applies for Social Security benefits. That may be at age 62 or later (or earlier if applying for title II disability benefits) (Manganaro, 2018).

For a DB pension plan that has failed and has been “trusteed” by the PBGC, the PBGC may owe the participant or beneficiary benefits.

Proposed Legislation

By now the reader will have noticed that the three main agencies with an interest in the benefits owed to missing and nonresponsive participants and beneficiaries (PBGC, EBSA, and IRS) have somewhat different purposes, requirements, procedures, and remedies. Currently, no plan sponsor can simultaneously satisfy the requirements of all three regulatory agencies (Warren, n. d.). In an effort to address this problem and bring some order to this area, two senators have proposed legislation on this topic.

Senators Elizabeth Warren (D-MA) and Steve Daines (R-MT) reintroduce proposed legislation to address the problem of missing participants and beneficiaries in the 116^th Congress. The proposal was titled the Retirement Savings Lost and Found Act of 2020 (S. 4192; RSLFA). The bill had been earlier introduced in 2016 as S. 3078 and in a modified form in 2018 as S. 2474. In 2020, the RSLFA was read twice and referred to the Senate Committee on Finance. However, it was not acted upon in the then Republican-controlled Senate.

House and Senate bills not acted upon in a congress may be reintroduced in the next congress. Bill numbers start over every 2 years. The RSLFA bill was reintroduced in the 117^th Congress on May 20, 2021 as S. 1730. Now that the Democrats hold a (thin) majority in both houses of Congress and the presidency, enactment is more likely.

The proposal would (1) create a National Office of Retirement Savings Lost and Found for retirement savings accounts consisting of data plan sponsors are already required to provide to the Treasury Department, (2) maximize investment earnings by making it easier for sponsors to move small accounts into age-appropriate target-date-funds, and (3) require sponsors to send lost or uncashed checks of less than US$1000 so that individual can locate these funds and continue to save for retirement. It would also increase the threshold for involuntary cash outs from US$5000 to US$6000.

S. 4192 was supported by the American Association of Retired Persons (AARP), American Benefits Council (ABC), ERISA Industry Committee (ERIC), and the Pension Research Council (PRC). Presumably, S. 1730 will be too now that it has been reintroduced.

Conclusion

This study has examined the problem of missing participants and beneficiaries from employer-sponsored pension plans and efforts to address the problem by the PBGC, EBSA, and IRS. It then looked at proposed legislation (now S. 1730) that would simplify and bring some administrative unity to the process. Now that both houses of Congress are under Democratic control and the President is a Democrat, there is a good chance that it will become law.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

John G. Kilgour .

Author Biography

John G. Kilgour, Ph. D. earned a BA in economics from the University of Connecticut (1966) and an MILR (1968) and a Ph.D. (1972) from Cornell University. He taught “compensation and benefits” and related courses and served in various administrative positions at California State University, East Bay from 1972 until fully retiring in 2005. Kilgour is the author of two books and over 100 journal articles, many of them in Compensation & Benefits Review.

References

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Internal Revenue Service n.d (n.d.). IRS strategic plan 2018 – 2022 (p. 10). Retrieved from https://www.irs.gov/pub/irs-pdf/p3744.pdf.

Joffe

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