$4 Billion in Pension Payments Returned
It’s the employer’s responsibility to find former employees and keep them apprised of any retirement benefits they left behind.
But that hasn’t always worked out. Some employers don’t have former workers’ current contact information, and others don’t bother to track them down. Worst-case scenarios are often fallout from a merger: the company being acquired has kept shoddy pension plan records and the acquirer doesn’t update them. Some companies have even deleted a participant’s name from the records.
Tyler Compton, an attorney with the Pension Action Center, which connects workers with lost pensions and 401(k) savings plans, said people frequently contact a former employer because they think they might have a plan. But if the worker is told he’s not in the records, he might drop the matter, she said.
The U.S. Department of Labor decided several years ago that employers’ efforts weren’t good enough. The department’s Employee Benefits Security Administration (EBSA) began investigating the problem and pushing companies to improve their methods for finding workers who had quit or been laid off but were owed pension benefits or had savings sitting in an old 401(k).
EBSA has gotten results. Since 2017, more than $4 billion in past due defined benefit pension payments have been returned to millions of plan participants.
By making clear what is expected of employers, regulators “put a lot of pressure, in a good sense, on plan administrators to really up their games,” Jeffrey Holdvogt, a legal partner with McDermott Will & Emery, said in a recent webinar hosted by the Pension Action Center at the University of Massachusetts, Boston.
EBSA officials say they are more interested in helping companies comply than citing violations. Based on the information collected in its years-long efforts, EBSA in January released a detailed list of recommendations to help employers find former workers. Retirement experts discussed this guidance in the webinar.
Mary Rosen, EBSA’s deputy regional director, said employers have myriad options for reconnecting with lost workers – from using social media and Google to hiring a professional firm that specializes in searching for individuals. Uncashed retirement checks and returned mail should always be investigated. And when companies that have merged or changed names mail out retirement plan information, they should put the name of the old company the employee worked for on the envelope so the person doesn’t throw it away.
A little common sense also works. Rosen said she visited a major New York employer that had been diligent about staying in contact with participants in its defined benefit plan – only two were missing. One of the participants lived down the street from the company, she said, but executives hadn’t been able to reach him because they couldn’t get past his 92-year-old mother who answered the phone.
“I said, ‘Why don’t you get in the car?’ ” Rosen said. “They got in touch with me [later] and said they’re down to one” missing participant.
The CARES Act inadvertently has improved communications between plan administrators and former employees, said Fidelity attorney Krista D’Aloia. Some workers took advantage of a provision in the CARES Act that waived the 10 percent penalty in 2020 for workers under age 59½ who withdrew savings from 401(k)s.
When employees reached out to withdraw money, D’Aloia said employers were able to update their records with email addresses or cell phone numbers.
“It’s important to have an alternative way to contact them,” she said.
If you think a former employer owes you a pension or can provide information about an old 401(k), contact the Pension Action Center for help.
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I once had the unfortunate luck of being assigned the telephone number of a now defunct (through several mergers) large corporation’s “personnel” department. I would regularly receive calls from long-retired employees or their survivors. Most said they had moved away, and had no idea that the company they knew was long gone. When I explained this to them, these elderly people would panic. I tracked down the company’s new ownership, got the phone number, and kept it handy so I could refer these retirees to it. It should not be that way–companies should make a real effort to contact former employees.