Americans leave billions in workplace 401(k) plans. DOL wants to help find their lost money. COURTNEY DEGEN Mr Incredible/Getty Images VIEW KEY DATA: Fidelity Investments Congress has tasked the Labor Department with building a lost-and-found database to help Americans find their lost retirement savings. It's off to a rocky start. The database — mandated by the retirement package SECURE 2.0 passed in late 2022 — will allow savers who lost track of their retirement money to locate their plan administrators, which experts agree is a complex problem in need of a solution. However, the DOL’s recent proposal for gathering information to build that database is laden with obstacles, industry sources said. The proposal, which the department released April 15, states that the DOL had planned to use existing data that 401(k) plans regularly submit to the IRS and Social Security Administration, in a filing known as Form 8955-SSA. That filing informs the government about retirement savers who left their employer but still have retirement accounts with them, explained Michael Kreps, principal at Groom Law Group and chair of its retirement services group. RELATED ARTICLE DOL issues proposal to collect information for lost-and-found 401(k) database “The challenge with the IRS is … they have a lot of statutory restrictions on what they can do with taxpayer information,” Kreps said, and according to the proposal, the IRS decided it cannot share such data with the Labor Department, citing disclosure and confidentiality restrictions. Consequently, the DOL asked for retirement plan administrators to submit the requested information on a voluntary basis. “That’s a reasonable approach to getting a new government program off the ground,” Kreps said, but plan sponsors may be hesitant to share information right away. Tim Rouse, executive director of the SPARK Institute, an advocacy organization for the retirement plan industry, echoed this concern. “I just don’t know how successful voluntarily asking for plan sponsors to do that (will be),” Rouse said. The DOL will likely receive many comments on the fact the request is voluntary, according to Kendra Isaacson, principal at Mindset, a Washington-based public policy consulting firm. “I think it is going to be more difficult on a voluntary basis,” added Isaacson, who previously worked as the pensions policy director and senior tax counsel for Sen. Patty Murray, D-Wash., when Murray chaired the Senate Committee on Health, Education, Labor, and Pensions. Lost-and-found database The creation of the lost-and-found database stemmed from a bill first introduced in 2016 by Sens. Elizabeth Warren, D-Mass., and Steve Daines, R-Mont., according to Kreps. Under that bill, the Treasury Department would have overseen the database and utilized the data already reported to them in filings. But SECURE 2.0 legislation changed the location of the database to the Labor Department. “Now, there’s a disconnect between where the (database) exists and where the relevant filings go,” Kreps said. Isaacson, who worked on SECURE 2.0 during her time in the Senate, contended, “DOL was the right place for this (database) to go, because finding missing participants is a fiduciary activity.” Since 2017, the Labor Department has recovered more than $6.7 billion for missing participants and beneficiaries through its enforcement efforts, according to an April 15 news release. As for why the database was proposed, “Congress heard from a lot of participants and advocates that have trouble finding their plans, and people move and change jobs a lot more in the modern world,” Isaacson said. Kreps said that while the request is voluntary right now, the Labor Department “certainly hints” that they might require the information in the future. Cybersecurity concerns A top concern about the database is cybersecurity-related, as the Labor Department’s proposal asks plan administrators for a large amount of data about participants and beneficiaries, including their mailing addresses, phone numbers, email addresses and Social Security numbers. “I think a lot of sponsors are going to say ok, DOL…we’ll think about it, but can you tell us more about how you’re going to protect this very sensitive data before we turn it over?” Kreps said. “There is a very large amount of information that was asked for, and I think there are some that are questioning whether that volume of information is necessary to connect people to their missing accounts,” Isaacson said. RELATED ARTICLE MOVEit cyberattack ignites worry about fiduciary responsibility DOL's proposal notes that “multiple security measures will be in place to protect plan participant and beneficiary data,” including “extensive logging and monitoring mechanisms, and sensitive data-masking techniques” to mask personally identifiable information. “I think everyone should be concerned about (this data) being out there, because clearly it’s going to be attractive to hackers and fraudsters,” noted the SPARK Institute’s Rouse, but he added the department has already acknowledged this and said it will work to protect the data. Kreps said the DOL will need to do more to get plan administrators to submit such sensitive information. “I appreciate the kind of steps they’ve taken to indicate that they care about (cybersecurity) in that proposal, but they're going to have to put some more meat on the bones before people are ready to sign on the dotted line,” Kreps contended. Notably, the Labor Department is only helping people find their accounts, not distribute their assets, so “it's just a matter of information security,” Isaacson said. IRS filings raise concerns While “SPARK and its members are very much in favor of coming up with a solution to limit and reduce missing participants,” Rouse said, the approach the DOL previously planned to take with the IRS filing, or Form 8955-SSA, “created a lot of concerns among our members.” The IRS filings regularly have delays at the end of the year, Rouse said, and such delays could result in false positives, meaning people would be incorrectly notified that they have money in lost accounts. Because the filings have been around for a while, there may have been confusion stemming from old records, as well, he added. “We believe that there is potential for automated solutions,” Rouse said, adding there’s at least three companies that have said they would provide an automated solution if the Labor Department requested information on it. One of those companies is the Portability Services Network, according to Rouse. In October 2022, Fidelity Investments, Vanguard Group and Alight Solutions, in coordination with Retirement Clearinghouse, announced it would launch the Portability Services Network: an auto-portability consortium aimed at reducing plan leakage, the term used to describe when Americans withdraw money from their retirement accounts upon changing jobs. “We would certainly encourage the department to, at the very least, explore those automated possibilities,” Rouse said. He has informally reached out to the department with his feedback and will be following up with a formal comment letter from the SPARK Institute. “I hope that (the) DOL will hear the comments and figure out a path to make this work, because I do think it's a necessary tool, but it has to work for employers and not add to their liability,” Mindset’s Isaacson said.
%% HARD to imagine that would be a big pile of money; 1] that people would leave much money like that. Anything is possible, maybe the PS Network will fix what little bit there is ?