Alice Morgan Photo Illustration by Investopedia
What you need to know
- Many workers who change jobs or resign leave their retirement savings at their previous employer and lose track of them.
- A ‘Retirement Savings Lost and Found’ database, meant to help workers find their missing workplace retirement plans, is expected to launch by December 29.
- Secure 2.0, a federal law on retirement, instructed the Department of Labor (DOL) to create this database.
The Department of Labor (DOL) is developing a ‘Retirement Savings Lost and Found’ database to help workers locate missing workplace retirement plans, such as 401(k)s.
The database's purpose is to help workers find lost retirement accounts if, say, they switch jobs or their employer goes bankrupt. The database is not yet live but should be by December 29. DOL currently collects data and information to populate the database from retirement plan administrators.
“Our goal, which we believe plan sponsors and administrators and their service providers share, is to make sure that workers and their beneficiaries receive all the retirement benefits they earned and were promised,” Lisa Gomez is the assistant secretary of Employee Benefits and Security.
Capitalize, a fintech firm that helps with rollovers estimates that there will be more than 29 millions forgotten 401(k), worth over $1.6 trillion, in May 2023.
And that’s probably why SECURE 2.0, a federal retirement law, directed the DOL’s Employee Benefits Security Administration (EBSA) to establish the database.
What happens when people forget about their 401(k),
When workers leave their jobs or change employers, they may have their retirement funds automatically cashed out if the balance is below $1,000, left in the account, or transferred to another retirement plan (either automatically, or voluntarily). This can be confusing and time consuming.
It’s not only old 401 (k)s that investors tend to overlook. Once that money is rolled over into an IRA, sometimes investors make the mistake of letting it sit in cash equivalent investments such as money market funds instead of actively investing and losing out on big potential gains compounded over many years.
David John, a senior strategic policy advisor at AARP, notes that some retirement recordkeepers—like Vanguard and Fidelity—have already established a program to help workers move their old 401(k) to their new employer’s retirement plan. However, the government's program may be more accessible, he said.
"We still need a much simpler system to enable people to move their money from employer to employer," he said.
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