Warren, Daines Re-Introduce Bill to Upgrade America's Retirement Saving System
Americans are already $7.7 Trillion Short on What They Need for Retirement
Washington, DC - United States Senators Elizabeth Warren
(D-Mass.) and Steve Daines (R-Mont.) today re-introduced the bipartisan
Retirement Savings Lost and Found Act to modernize the retirement system to
better protect Americans' hard-earned savings. The proliferation of small
accounts is costing Americans tens of billions of dollars every year in lost
savings because of cash-outs and redundant fees, and that doesn't include lost
savings from missing accounts.
As employers have shifted from defined benefit pensions to individualized retirement plans such as 401(k)s, workers have become responsible for tracking, managing, and consolidating multiple retirement accounts as they move from job to job. But moving accounts from job to job is not easy. A 2014 Government Accountability Office (GAO) report found that many Americans leave their jobs each year without giving their employers directions with what to do with their retirement accounts. 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 increase in employers' use of auto enrollment since the passage of the 2006 Pension Protection Act has also resulted in a significant increase in the number of small accounts - sometimes without employees even realizing they have one. Many of these accounts are lost or neglected. Shorter job tenures among younger workers has contributed to multiple inactive accounts for individuals as well.
"Everyone should be able to build financial security and retire with dignity - yet millions of Americans are losing critical savings when they move between jobs," said Senator Warren. "This bipartisan bill upgrades our retirement system to make it easier for Americans to keep the retirement savings they've worked for and earned and easier for employers to connect their former employees with the accounts they have left behind."
"Montanans should not have to worry about losing their hard-earned dollars when they change jobs," said Senator Daines. "This bipartisan bill will empower individuals to take control of their retirement future."
The Retirement Savings Lost and Found Act uses the data employers are already required to report to create a national, online, lost and found for Americans' retirement accounts. This means that with the click of a button, any worker can locate all of his or her former employer-sponsored retirement accounts.
The Retirement Savings Lost and Found Act also:
- Allows employers to more easily invest abandoned accounts into target date funds rather than money-market funds. According to the GAO, $1,000 in a target date account was projected to grow to $2,700 over thirty-years whereas a $1,000 in a money market account was reduced to $0.
- Allows for uncashed checks of less than $1,000 to be transferred to Treasury securities, so that individuals can locate this money and continue to save for their retirement.
- Clarifies the responsibilities employers and plan administrators have to connect former employees with their neglected accounts.
The legislation is supported by AARP and the ERISA Industry Committee.
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