Lost retirement plan participants most often tend to be millennials, who move frequently and might not update their address with a former employer. (Photo: Getty)
A study from Boston Research Technologies and Retirement Clearinghouse has found that a participant move has created a stale address record for one out of every five retirement plan accounts—just because the participant didn't notify a former employer when relocating.
The study "The Mobile Workforce's Missing Participant Problem" also finds that the frequency with which participants move contributes to the problem.
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"High workforce mobility, and the fact that participants frequently forget to update their contact details with previous employers and plan recordkeepers, are twin drivers of missing participants in employer-sponsored plans," Warren Cormier, founder and CEO of Boston Research Technologies, says in the report. Cormier adds, "Demographic trends revealed in the survey suggest the problem could get worse before it gets better."
In fact, survey results also indicate that 11 percent of all terminated account records have an outdated address, and most of these missing participant accounts, especially those with balances below $10,000, belong to millennials.
The study finds that 67 percent of stale address records for missing participants can actually be matched with an active participant record in the systems of the recordkeepers already used by sponsors to administer their plans—with active participant records being very reliable, at 92.6 percent. According to the study, active participant records "are an untapped source of verified, accurate addresses that sponsors can leverage to help mitigate the growing problem of missing participants in retirement plans."
"Terminated participants are a dynamic problem tied directly to the growing frequency of job-changing among defined contribution plan participants," Spencer Williams, founder, president and CEO of Retirement Clearinghouse, says in the report. Williams adds, "At a time when the Department of Labor has been placing more emphasis on missing participants during plan audits, one simple solution is to strongly encourage participants to take their accounts with them to their new-employer plans."
The study also finds that millennials—as befits their jobhopping reputations—are the most likely to be the owners of those orphaned accounts, and low-income households are twice as likely to have missing participants than households with higher incomes.
In addition, 60 percent of participants would like an automated process by which they can update their addresses or consolidate their prior-employer plan accounts in their current-employer plans.
A third of study participants—including half of the millennials in the study—learned of a retirement savings account with a previous employer's plan that they didn't know they had. And study results indicate that the strongest predictor of the account not being lost was the respondent's knowledge of how to contact the company holding the account; accounts held by respondents who reported being able to do this were almost 7 times less likely to be lost.
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Marlene Satter
Marlene Y. Satter has worked in and written about the financial industry for decades.
