Senators Reintroduce Bill to Address Missing Participants

The bill establishes steps retirement plan sponsors can take to avoid violations of RMD and ERISA rules, among other things.

Previously introduced in 2016, U.S. Senators Elizabeth Warren, D-Massachusetts, and Steve Daines, R-Montana, have reintroduced legislation aimed at addressing the retirement plan missing participant problem.

The Retirement Savings Lost and Found Act of 2018 would set up a Lost and Found online database that uses the data employers are already required to report, so that any worker can locate all of his or her former employer-sponsored retirement accounts. According to the bill text, the Retirement Savings Lost and Found Act will provide individuals only with the ability to view contact information for the plan administrator of any plan with respect to which the individual is a participant or beneficiary, sufficient to allow the individual to locate the individual’s plan.

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Under the bill, a plan that failed to find a missing participant wouldn’t be treated as violating the required minimum distribution (RMD) rules and the Employee Retirement Income Security Act’s (ERISA) fiduciary rules if it has fulfilled certain requirements. These include making at least one (unsuccessful) attempt to contact the individual at the most recent address maintained for the individual in the records of the plan, by certified mail or other similar delivery service if the most recent address is a physical address, and by electronic mail or other electronic communication if the only address on record is an electronic address, and taking at least one (two, in the case of an individual for whom the plan records contain only an electronic address) additional measure.

The additional measures are:

  • Checked with the administrator of a related plan or checked the plan sponsor’s records for an updated address.
  • Made at least one unsuccessful attempt to contact the individual’s designated plan beneficiary.
  • Performed at least one search using free electronic search tools.
  • Attempted to locate the participant using a commercial locator service.

The bill increases the automatic rollover amount from $5,000 to $6,000 and expands investment options for these rollovers to include a target-date or lifecycle fund, an investment product designed to preserve principal and provide a reasonable rate of return, and another option as the Secretary of Treasury may provide.

For plan balances of $1,000 or less, if within six months of notification, the plan participant has not made an election to receive a distribution of the benefit directly or has not accepted any direct payment, the plan administrator can transfer the amount of such benefit to the Director of the Retirement Savings Lost and Found or to an individual retirement account established by the Secretary of Treasury on behalf of the individual.

The ERISA Industry Committee and the American Benefits Council have expressed support of the bill.

Millennials Benefiting from PPA

They are on track to replace 75% of their income, compared to 64% for Americans overall.

Millennials are the first generation to fully benefit from improvements made to retirement plans over the last decade, notes the Empower Institute. According to its survey, they are on track to replace 75% of their income in retirement, compared to 64% for Americans overall, 61% for Gen Xers and 58% for Baby Boomers.

The Pension Protection Act of 2006 was enacted when Millennials began entering the workforce, and it paved the way for automatic enrollment and escalation, all the while acknowledging the significance of employer matches. Forty-one percent of Millennials are automatically enrolled in a defined contribution (DC) plan, compared to 38% of Gen Xers and 33% of Boomers. In addition, 38% of Millennials are in a plan with automatic escalation features.

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“New features such as automatic enrollment and automatic escalation have come a long way in making access to retirement savings programs easier for employees and in shaking off some of the concerns with earlier DC plan designs,” says Edmund Murphy III, president of Empower Retirement. “Millennials are the first generation in the workforce to fully benefit from changes in the law made in 2006.”

The survey also revealed that 24% of Millennials have a formal plan for retirement, compared to 19% of Gen Xers and 17% of Boomers. Forty-eight percent of Boomers think they will work at least part-time in retirement, compared to 44% of Gen Xers and 40% of Millennials.

Fifty-nine percent of Millennials think Social Security will be a source of income in retirement, compared to 73% of Gen Xers and 88% of Boomers.

Sixty-one percent of Millennials expect DC plans to be a source of income in retirement, compared to 55% of Gen Xers and 47% of Boomers.

“Millennials who have had access to defined contribution plans are taking charge of their retirement planning by setting up a formal plan and seeking professional advice,” Murphy says. “Those are two strategies that are likely to lead to better retirement incomes.”

The Empower Institute conducted the survey of 4,000 adults in partnership with Brightwork Partners, LLC.

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