In these instances, a plan signs a contract with an IRA  provider, which may or may not be the plan’s record keeper, to establish  and maintain the account. Target date funds are designed to be long-term investments for individuals with  particular retirement dates in mind. Current Law Limits Forced Transfer Options and Permits Plans to Force Out Some Participants with Balances Larger Than $5,000

			DOL and IRS Are Precluded from Permitting Alternative Destinations for Forced Transfers

Currently the default destination for forced transfers of more than $1,000  from active plans is an IRA. As a result, a  smaller number of participants forced out of terminating plans will end up  with savings in a forced-transfer IRA. Disregarding Rollovers Makes It Harder for Low-Wage Workers to Keep Retirement Savings in a 401(k) Plan

Current law allows plans that are determining if they can force out a  participant to exclude rollover amounts and any investment returns that  have been earned while in the plan.exclude a participant’s savings that were rolled into the plan when  calculating their vested balance, which determines whether the participant  may be forced out. Keeping Track of 401(k) Plan Accounts Can Be Difficult Because of Challenges with Consolidation, Communication, and Information, but SSA Is in a Position to Help

		Having Multiple Accounts Makes It Difficult for Participants to Keep Track of Retirement Savings

401(k) plan participants often lose track of their accounts over time. Absent plan-to-plan  rollovers, participants frequently roll over their accounts into IRAs or leave  their 401(k) savings with their former employers, both of which increase  the number of accounts for the participants if they then go on to enroll in  their new employers’ plans. For example,  one industry professional noted that if former participants’ e-mail contacts  are work e-mails, they will lose contact with their plans when they change  jobs and do not provide alternate e-mail addresses. Federal agency officials told us that inactive participants can fail to find  their accounts with former employers and do not always know where to  go to seek assistance or find information about their accounts. Although the models employed vary by country, the  three countries with tracking tools we studied allow participants online  access to consolidated information on their workplace retirement  accounts, referred to as “pension registries” in this report. Switzerland—According to Swiss officials, forced transfers in Switzerland  are consolidated in a single fund, the Substitute Plan, administered by a  non-profit foundation and invested until claimed by participants (see fig. Workplace account information: All include information on workplace  retirement accounts. Instead, they will refer participants to the pension   Plans in Australia also use the pension registry to  registry for answers.identify inactive accounts their participants have in other plans and to talk  to participants about consolidating their accounts. SuperSeeker can also be used to locate lost  accounts not held by ATO. The United States Lacks a Pension Registry That Can Provide New Opportunities for Participants

Currently, there is no national pension registry in the United States. Matters for Congressional Consideration

To better protect the retirement savings of individuals who change jobs,  while retaining policies that provide 401(k) plans relief from maintaining  small, inactive accounts, Congress should consider amending current law  to:  1. Repeal the provision that allows plans to disregard amounts  attributable to rollovers when determining if a participant’s plan  balance is small enough to forcibly transfer it. GAO Response to DOL Comments

DOL agreed to evaluate the possibility of convening a taskforce to  consider the establishment of a national pension registry. Appendix I: Objectives, Scope, and Methodology

This report examines (1) what happens to forced-transfer individual  retirement accounts (IRA) over time; (2) the challenges 401(k) plan  participants face keeping track of their retirement savings and what, if  anything, is being done to help them; and (3) how other countries address  the challenges of inactive accounts. To better understand forced-transfer IRAs, as well as the challenges  people face in keeping track of multiple 401(k) plan accounts, we also  interviewed plan sponsor groups, 401(k) plan industry groups, research  entities, consumer groups, and six federal agencies (Department of  Labor, Department of the Treasury, Social Security Administration,  Pension Benefit Guaranty Corporation (PBGC), Securities and Exchange  Commission, and Consumer Financial Protection Bureau) about plans’  use of forced-transfer IRAs and what challenges individuals and plans  face related to multiple accounts and inactive accounts in the United  States. On the basis of this initial review, we selected  six countries—Australia, Belgium, Denmark, the Netherlands,  Switzerland, and the United Kingdom—that could potentially provide  lessons for the United States. Based on that estimate and assuming an average  account balance of $2,500 (half of the $5,000 cap), a total of $1.5 billion  would be transferred into these accounts each year. Specifically, it must describe the plan’s forced-transfer IRA provisions (including an  explanation that the forced-transfer IRA will be invested in an investment product designed to  preserve principal and provide a reasonable rate of return and liquidity), a description of how fees and  expense attendant to the individual retirement plan will be allocated (i.e., the extent to which  expenses will be borne by the account holder alone or shared with the distributing plan or plan  sponsor), and the name, address and phone number of a plan contact (to the extent not otherwise  provided). Small balances may be  eaten away by fees, necessitating  forced-transfers to preserve their  value.
Why GAO Did This Study

Millions of employees change jobs each year and some leave their savings in their former employers' 401(k) plans. If their accounts are small enough and they do not instruct the plan to do otherwise, plans can transfer their savings into an IRA without their consent. GAO was asked to examine implications for 401(k) plan participants of being forced out of plans and into these IRAs.
GAO examined: (1) what happens over time to the savings of participants forced out of their plans, (2) the challenges 401(k) plan participants face keeping track of retirement savings in general, and (3) how other countries address similar challenges of inactive accounts. GAO's review included projecting forced-transfer IRA outcomes over time using current fee and return data from 10 providers, and interviews with stakeholders in the United States, Australia, Belgium, Denmark, the Netherlands, Switzerland, and the United Kingdom.

What GAO Found

When a participant has saved less than $5,000 in a 401(k) plan and changes jobs without indicating what should be done with the money, the plan can transfer the account savings—a forced transfer—into an individual retirement account (IRA). Savings in these IRAs are intended to be preserved by the conservative investments allowed under Department of Labor (DOL) regulations. However, GAO found that because fees outpaced returns in most of the IRAs analyzed, these account balances tended to decrease over time. Without alternatives to forced-transfer IRAs, current law permits billions in participant savings to be poorly invested for the long-term. GAO also found that a provision in law allows a plan to disregard previous rollovers when determining if a balance is small enough to force out. For example, a plan can force out a participant with a balance of $20,000 if less than $5,000 is attributable to contributions other than rollover contributions.
Some 401(k) plan participants find it difficult to keep track of their savings, particularly when they change jobs, because of challenges with consolidation, communication, and information. First, individuals who accrue multiple accounts over the course of a career may be unable to consolidate their accounts by rolling over savings from one employer's plan to the next. Second, maintaining communication with a former employer's plan can be challenging if companies are restructured and plans are terminated or merged and renamed. Third, key information on lost accounts may be held by different plans, service providers, or government agencies, and participants may not know where to turn for assistance. Although the Social Security Administration provides individuals with information on benefits they may have from former employers' plans, the information is not provided in a consolidated or timely manner that would be useful to recipients.
The six countries GAO reviewed address challenges of inactive accounts by using forced transfers that help preserve account value and providing a variety of tracking tools referred to as pension registries. For example, officials in two countries told GAO that inactive accounts are consolidated there by law, without participant consent, in money-making investment vehicles. Officials in the United Kingdom said that it consolidates savings in a participant's new plan and in Switzerland such savings are invested together in a single fund. In Australia, small, inactive accounts are held by a federal agency that preserves their real value by regulation until they are claimed. In addition, GAO found that Australia, the Netherlands and Denmark have pension registries, not always established by law or regulation, which provide participants a single source of online information on their new and old retirement accounts. Participants in the United States, in contrast, often lack the information needed to keep track of their accounts. No single agency has responsibility for consolidating retirement account information for participants, and so far, the pension industry has not taken on the task. Without a pension registry for individuals to access current, consolidated retirement account information, the challenges participants face in tracking accounts over time can be expected to continue.

What GAO Recommends

GAO recommends that Congress consider (1) amending current law to permit alternative default destinations for plans to use when transferring participant accounts out of plans, and (2) repealing a provision that allows plans to disregard rollovers when identifying balances eligible for transfer to an IRA. Among other things, GAO also recommends that DOL convene a taskforce to explore the possibility of establishing a national pension registry. DOL and SSA each disagreed with one of GAO's recommendations. GAO maintains the need for all its recommendations.