Lost retirement money

Experts estimate there are close to 4 million “lost” 401k and similar retirement accounts. The balances on these accounts range from just a few dollars to thousands. The average balance of a “lost” account is roughly $10,000, according to the Boston Research Group.

An account is considered lost when an employer (plan sponsor) has the wrong address or social security number on file for a former worker. Lost accounts can go untouched for years or decades because without explicit permission from its owner, investment firms cannot alter the investment or prevent certain fees from being applied. That means the longer you wait to search for your lost nest egg, the greater the chance that it could be shrinking.

 “Lost participants or disconnected accounts are part of a larger dynamic we are trying to solve in the retirement system,” says Spencer Williams, CEO of Retirement Clearinghouse.

(Source: Plan Sponsor Council of America survey)

Are you likely to have a lost retirement account?

Many circumstances can lead to lost retirement accounts.

Worker mobility

The Employee Benefits Research Institute says the average American worker will change jobs 7.4 times over the span of a 40-year career. All those changes increases the risk someone could forget to update his/her address. As people change jobs, some do not leave updated contact information or fail to rollover their retirement account.

Auto-enrollment in Age of Direct Deposit

Many companies use auto-enrollment to encourage employees to save for retirement. Some experts believe the feature may be contributing to the number of lost accounts. The Plan Sponsor Council of America says almost 46% of companies’ auto-enrolled employees into retirement plans in 2011, and that number is on the rise.  

“I think (the problem of lost retirement accounts) is going to get worse, as more and more companies are using the auto-enrollment feature,” said ERISA senior attorney, Vicki Blanton.
 

(Source: Boston Research Group)

Do you have an unclaimed retirement account? Follow Real Money’s simple action plan to locate it:

1. Write a letter to your former employer’s human resource director and ask the following questions:

a. Was there a retirement plan in place while you worked there?
b. Were you auto-enrolled?
c. What is your account balance?

2. In your letter, be sure to include the following:

a. Current address
b. Phone number
c. E-mail
d. Legal name at the time of your employment
e. Years of Employment
f. Manager’s name
g. Approximate pay range
h. Request a written response

3. If your former employer no longer exists because it went out of business or was acquired, you may need to reach out to the Department of Labor.

4. Many companies rollover retirement accounts with small balance (less than $1,000) into Individual Retirement Plans (IRA). Your money still belongs to you but may be trickier to find.  

Still have questions?

The U.S. Dept. of Labor will help you find out if your plan is in the process of or has been terminated. This link will also help you find out the name of the Qualified Termination Administrator (QTA) responsible for the terminating it: http://askebsa.dol.gov/AbandonedPlanSearch

The National Registry of Unclaimed Retirement Benefits is a nationwide, secure database listing of retirement plan account balances that have been left unclaimed. The website is designed to help match employers with abandoned or forgotten retirement accounts with former employees they rightfully belong to: https://www.unclaimedretirementbenefits.com

You or someone you know may be owed benefits from a terminated and forgotten pension plan. The Pension Guaranty Benefits Corporation will help you find missing participants: http://www.pbgc.gov/res/search.html

(Vanessa Longshaw &  Duarte Geraldino contributed reporting on this story.)