A forced transfer occurs when a plan participant has separated from an employer, but still has vested savings in the employer’s 401(k) plan and the plan sponsor decides not to allow the savings to remain in the plan. Prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), plans could, in the absence of participant instructions, distribute balances of not more than $5,000 by paying them directly to the participant, referred to as a cash-out. EGTRRA sought to protect forced- out participants’ retirement savings by requiring that, in the absence of participant instructions, active plans transfer balances of $1,000 or more to forced-transfer IRAs, thus permitting the plan to distribute them while preserving their tax-preferred status. Expanding upon the statute, regulations later provided that in the absence of participant instructions, plans could opt to also transfer balances of $1,000 or less into forced- transfer IRAs. Active plans may not distribute accounts with contributions of more than $5,000 without the consent of the participant. EGTRRA also required DOL to prescribe regulations providing safe harbors under which the designation of a provider and the investment of funds for a forced-transfer IRA are deemed to satisfy fiduciary duties under ERISA. These regulations, issued in 2004, established a ‘safe harbor’ for plan fiduciaries transferring forced-out participants’ accounts, which includes conditions pertaining to the plan fiduciaries’ selection of the IRA provider and the investments of the transferred funds. We identified five main components in the regulations, which are: (1) preservation of principal, (2) maintenance of the dollar value of the investment, (3) using an investment product of a state or federally regulated financial institution, (4) fees and expenses, and (5) a participant’s right to enforce the terms of the IRA. Plan sponsors forcing participants out of plans by transferring their accounts into forced-transfer IRAs legally satisfy their fiduciary standard of care to participants if they comply with DOL’s safe harbor regulations.transferred into a forced-transfer IRA it is subject to the rules generally governing IRAs. A forced-transfer IRA is a type of IRA that can be opened by a plan on behalf of a participant, without the specific consent or cooperation of that participant. 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. While the use of forced-transfer IRAs for accounts under $1,000 is not required, plan sponsors may elect to use forced-transfer IRAs rather than cash-outs when forcing out such accounts in the absence of distribution instructions from the participant, as shown in figure 1. Use of forced-transfer IRAs is common among 401(k) plans. One annual industry survey shows that about half of active 401(k) plans force out separated participants with balances of $1,000 to $5,000. Data provided by the Social Security Administration (SSA) highlight an amount of retirement savings that could be eligible for forced-transfer IRAs. From 2004 through 2013, separated employees left more than 16 million accounts of $5,000 or less in workplace plans, with an aggregate value of $8.5 billion. A portion of those accounts constitutes billions in retirement savings that could be transferred later to IRAs. Even if plans do not force out participants’ accounts immediately upon separation they may do so later in the year. For instance, they may sweep out small accounts of separated participants once a year or amend their plans years after participants separate and then force them out. Multiple federal agencies have a role in overseeing forced transfers and investments, inside and outside the Employee Retirement Income Security Act of 1974 (ERISA) plan environment, as discussed in table 1. SSA analysis of Form 8955-SSA data, which are collected by IRS and then transmitted to SSA. SSA data include benefits left behind by separating participants in all defined contribution plans, including 401(k) plans, as well as in defined benefit plans, which are not subject to forced transfers under 26 U.S.C. § 401(a)(31)(B). GAO assessed the reliability of the data and found that it met our standards for our purposes. Some forced-transfer IRAs are not the short-term investment vehicles for which their default investments are better suited, but providers do not have the flexibility under current DOL safe harbor regulations to use investment vehicles that are better suited to a longer-term investment horizon. Rather, the safe harbor requires that the investment “seek to maintain, over the term of the investment,” the dollar value equal to the amount rolled over. To achieve this, DOL narrowly wrote the investment guidance portion of the forced-transfer IRA safe harbor regulations to effectively limit providers to holding the funds in money market funds, certificates of deposit, or assets with similarly low investment risk typically deemed appropriate for holding money for a short term. While such conservative investments generally ensure that the money is liquid (that is, available to the owner upon demand for cash-out, transfers to another account, or reinvestment elsewhere), they can result in a low return and potentially minimal growth over time. Most forced-transfer IRA balances in accounts we analyzed will decrease if not transferred out of forced-transfer IRAs and reinvested, because the fees charged to the forced-transfer IRAs often outpace the low returns earned by the conservative investments prescribed by DOL’s safe harbor regulations. In recent years, the typical forced-transfer IRA investment, such as a money market account, has earned almost no return. For example, taxable money market funds averaged 1.45 percent for the 10 years ending July 31, 2014. We collected forced-transfer IRA account information from 10 forced-transfer IRA providers, including information about the fees they charged, the default investments used, and the returns obtained (prior to these fees). Among those 10, there were 19 different combinations of fees and returns, as some providers offered more than one combination for their forced-transfer IRA contracts. The typical investment return for the 19 different forced-transfer IRA combinations ranged from 0.01 percent to 2.05 percent. A low return coupled with administrative fees, ranging from $0 to $100 or more to open the account and $0 to $115 annually, can steadily decrease a comparatively small stagnant balance. Using the forced-transfer IRA fee and investment return combinations, we projected the effects on a $1,000 balance over time. While projections for different fees and returns show balances decreasing at different rates, generally the dynamic was the same: small accounts with low returns and annual fees decline in value, often rapidly. In particular, we found that 13 of the 19 balances decreased (See appendix III for all projected outcomes.) For to $0 within 30 years.example, the fees and investment returns of one provider we interviewed would reduce an unclaimed $1,000 balance to $0 in 9 years. Even if an account holder claimed their forced-transfer IRA after a few years the balance would have significantly decreased. Among the 19 combinations we analyzed, our analysis showed an average decrease in a $1,000 account balance of about 25 percent over just 5 years. The rate of investment return needed to ensure a forced-transfer IRA balance does not lose real value varies depending on the rate of inflation and the fees charged. For example, given the median fees for the 19 forced-transfer IRAs we analyzed, the investment return on $1,000 would have to be more than 7.3 percent to keep pace with both the rate of inflation and the fees charged.obtained from forced-transfer IRA providers, five of which told us that their accounts are reduced to zero or do not keep pace with inflation and fees. Target date funds are designed to be long-term investments for individuals with particular retirement dates in mind. For more information on target date funds, see GAO, Defined Contribution Plans: Key Information on Target Date Funds as Default Investments Should Be Provided to Plan Sponsors and Participants, GAO-11-118 (Washington, D.C.: Jan. 31, 2011). digit gains. In recent years, assets in target date fund default investments have produced a higher return than typical forced-transfer IRA investments, which have seen minimal returns. For example, as shown in figure 2, under reasonable return assumptions, if a forced-out participant’s $1,000 forced-transfer IRA balance was invested in a target date fund the balance could grow to about $2,700 over 30 years (173 percent growth), while the balance would decline to $0 if it had been invested in a money market account. We also projected the remaining balance assuming a 15-year average return for money market funds, which is 1.89 percent, and found no material difference in the result. Using that return the balance significantly decreased over time, leaving a $67 balance after 30 years. According to DOL officials, the agency has the flexibility under current law to expand the safe harbor investment options for forced-transfer IRAs, but currently its regulations do not permit those accounts to be invested in the same funds allowed for participants automatically enrolled in 401(k) plans. DOL’s goal of preserving principal is important and consistent with statute, but without more aggressive investment options, forced- transfer IRA balances can continue to lose value over time, causing some former participants to lose the savings they had accumulated in their 401(k) plans. However, allowing forced-transfer IRAs to be invested for growth, such as through a target date fund, may be more effective in preserving principal. Currently the default destination for forced transfers of more than $1,000 from active plans is an IRA. EGTRRA sought to protect forced-out participants by providing that, in the absence of any participant instructions, active plans that choose to force out participants with accounts of $1,000 or more must transfer the accounts to an individual retirement plan, which is defined as an IRA or individual retirement Directing these larger balances to IRAs in lieu of cashing them annuity.out preserves their savings’ tax-preferred status in a retirement account. Current law does not permit DOL and IRS to adopt alternative destinations. The specific investment products held in IRAs and 401(k) plans, as well as the various financial professionals that service them, are subject to oversight from applicable securities, banking, or insurance regulators, which can include both federal and state regulators. provisions.to a forced-transfer IRA it is no longer under the regulatory purview of ERISA and is essentially without DOL oversight. In addition, by transferring forced out participants’ funds in accordance with the safe harbor regulations, a plan satisfies its fiduciary duty of care under ERISA, and the transfer constitutes a final break between the plan and the transferred account. For example, the plan is not required to monitor the forced-transfer IRA to ensure that the provider abides by the terms of the agreement. Thus, when an individual’s 401(k) plan account is transferred Current law permits terminating plans to distribute forced transfers in multiple ways, with the forced-transfer IRA being only one option, as shown in table 2. IRA, terminating plans may also purchase an annuity with the forced- transfer balances or escheat (transfer) the balances to the state. Further, the Pension Protection Act of 2006 (PPA) created a forthcoming alternative for terminating 401(k) plans, which will be to transfer balances to the Pension Benefit Guaranty Corporation (PBGC) when there are no instructions from the participants. Moreover, we found that some providers will not provide forced-transfer IRAs for terminating plans, generally doing so only as an accommodation to ongoing plan clients and because these plans do not have alternatives to the IRA. As a result, a smaller number of participants forced out of terminating plans will end up with savings in a forced-transfer IRA. 26 U.S.C. § 4975 and 29 U.S.C. § 1108. Terminating plans force out both current and separated participants’ balances to dispose of all plan assets, as required to complete a plan termination. States generally have jurisdiction over unclaimed property, but they cannot require escheatment of inactive accounts still in a 401(k) plan because the Employee Retirement Income Security Act of 1974 (ERISA)—the law governing employer-based retirement plans—preempts states’ claims to what would otherwise be considered abandoned property. 29 U.S.C. §1144. Therefore, this escheatment is the plan’s choice for the disposition of the account. U.S. Dept. of Labor, Field Assistance Bulletin 2014-01 (Aug. 14, 2014), available at http://www.dol.gov/ebsa/regs/fab2014-1.html. We also found that forced-transfer IRAs can become long-term investments for the many account holders who do not claim their accounts even though the emphasis placed by the safe harbor regulations on liquidity and minimizing risk are more often associated with short-term investment vehicles. One of the larger providers we interviewed said that during the first year after an account is opened about 30 percent of account holders will do nothing with the account. According to a forced-transfer IRA service provider, an estimated half of the accounts they opened are for missing participants. Many unclaimed accounts may remain so indefinitely. For example, one provider we interviewed reported that nearly 70 percent of the accounts it has opened within the last 5 years remain open and unclaimed. Additionally, an individual could end up with multiple forced-transfer IRAs over time— each incurring its own administrative fees. Two providers we interviewed explained that they do not consolidate forced-transfer IRAs opened for the same individual, meaning that accounts even with the same provider could incur redundant fees. Although there may be alternatives to the forced-transfer IRA today that were not considered in 2001 when the law was passed, without authority to do so, DOL and IRS cannot identify or facilitate alternative destinations for these accounts. Providing an alternative destination for forced transfers would help to preserve participants’ accounts and increase the possibility for growth. Absent the allowance of such an alternative, as we have shown, former plan participants’ savings will continue to be placed in investments unlikely to be preserved or grow over the long term. 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. Specifically, separated participants with 401(k) accounts of any size can be forced from a plan if the vested balance (in the absence of rollover amounts and its earnings) is $5,000 or less, as demonstrated in figure 3. A rollover of more than $5,000 would not have been subject to forced transfer if it had remained in the participant’s last plan, but may become subject to it once transferred to the new plan. 401(k) plan participants often lose track of their accounts over time. In the United States, the responsibility is on the individual to manage their retirement savings, including keeping track of 401(k) plan accounts. The considerable mobility of U.S. workers increases the likelihood that many will participate in multiple 401(k) plans. Over the last 10 years, 25 million participants in workplace plans separated from an employer and left at When least one account behind and millions left two or more behind.individuals hold multiple jobs, they may participate in many 401(k) plans or other types of employer-sponsored plans and upon changing jobs face recurring decisions about what to do with their plan savings. Figure 6 illustrates how a participant can accumulate multiple retirement accounts over a career. There are many reasons participants have multiple accounts for retirement savings. Currently, there is no standard way for participants to consolidate their accounts within the 401(k) plan environment. For example, employers do not always permit rollovers into their 401(k) plans. As we previously reported, there are barriers to plan-to-plan rollovers that DOL and IRS need to address to facilitate such rollovers when participants may wish to choose that option. 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. Plan-to-plan rollovers help reduce the number of lost accounts because the accounts stay with the participants. This option is, however, irrelevant if the new employer does not offer a plan. Industry representatives we interviewed said automatic enrollment also contributes to participants having multiple accounts. Although automatic enrollment facilitates retirement saving, individuals may be less apt to pay attention to an account that they did not make the decision to enroll in. Industry professionals told us that individuals with a collection of many small accounts may forget about them because the small balances provide them less incentive to pay attention to them. In addition, automatic enrollment is likely to exacerbate the accumulation of multiple, small accounts. As more participants are brought into the system there could be an increase in forgotten accounts, because many of those participants are unengaged from the start, in spite of DOL notification requirements. However, as GAO has previously reported automatic enrollment can significantly increase participation in 401(k) plans. When participants leave their savings in a plan after leaving a job, the onus is on them to update former employers with address and name changes, and to respond to their former plan sponsor’s communications. Plans and record keepers have no automatic way to keep this information up to date for participants, nor do they have ways to ensure that separated participants will respond to their communications. 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. When a plan loses track of a participant it can create a number of challenges because the plan has to spend time and incur the cost of searching for the participant. In addition, there are no standard practices among plans and providers for the frequency or method of conducting searches for missing or nonresponsive participants. While there is agency guidance on searching for missing participants in terminating plans prior to forcing them out, in hearings before the ERISA Advisory Council and in our interviews, providers and other industry professionals reported that the guidance on searches is unclear and insufficient. For instance, it is unclear how to satisfy disclosure requirements when the participant’s address on file is known to be incorrect. One provider told us plans are obligated to make a “good faith effort” to locate participants, but they do not always know what a good faith effort entails. This leaves plans unsure of what steps they must take to satisfy applicable search requirements. Employer actions, such as terminations, mergers, and bankruptcies can also make it difficult for participants to keep track of their accounts. Participants and beneficiaries can lose track of former employers’ plans when the employers change location or name, merge with another company, spin-off a division of the company, or go out of business. DOL officials said that one of the most challenging problems facing participants and their advocates is tracking down lost plans. For example, company records for legacy plans, old plans that no longer have operating units, may be scattered, making employee and participant data difficult to locate, and the former plan’s administrative staff may no longer be available to respond to questions regarding participant records. The current regulatory environment also presents challenges to participants. Participants separating from their employer are to receive information about their accounts via multiple disclosures. Depending on the actions participants take regarding their accounts upon separation, their former employers will provide them and regulatory agencies with relevant required disclosures and reports. (See appendix VI for a list of selected disclosures required when participants separate from employment or when plans undergo certain types of corporate restructuring.) As participants change jobs over time and accumulate multiple accounts, those who remain engaged with their accounts will acquire a large volume of documentation. For example, the hypothetical worker from figure 6 who had separated from three jobs would receive at least nine different notices from the three plan sponsors. In the instances where the worker’s 401(k) plan savings were transferred to another account, the worker would have been provided information about the new account. Over time, the worker would continue to receive annual—or sometimes quarterly—statements from each account as well as various other notices and disclosures depending on any changes in the structure or terms of the plans or accounts. Over 10 years, if that worker had no further job changes or changes to the existing accounts, routine account statements alone would result in at least 40 separate documents. If even one of the accounts issued quarterly statements, the number of documents would increase to 70, which does not include any disclosures the worker might receive about the underlying investments of the accounts or information regarding changes to a plan or IRA. Participants may also have difficulty understanding the complex notices or account statements they receive. As we have previously reported, the quantity of information participants receive may diminish the positive effects such important information could have for them. Our previous work found that participant disclosures do not always communicate effectively, participants often find the content overwhelming and confusing, and many participants rarely read the disclosures they receive. In addition, although 401(k) plans are required to report annually on plan design, finances, and other topics to DOL, IRS, and PBGC via the Form 5500 Series and a number of other forms required by the IRS, the information reported may not always result in a clear record or trail of employer or plan changes. For instance, DOL officials told us that many small plans fail to file an updated or final Form 5500, which would include a valuable piece of information, an employer identification number, which can be used to track a new plan resulting from a merger. In the event of a plan termination, the plan administrator may file Form 5310, a request for a determination letter on a plan’s qualified status, with the IRS, but must provide participants an “Notice to Interested Parties” notifying them of their right to comment on the plan termination. In certain instances of a company spinoff, only the plan that was in existence before the spinoff is required to file a Form 5310-A, making it difficult to trace the new plan back to the original plan. We recently reported that this notice confuses participants and it is difficult for the average pension plan participant to exercise their right to comment. In addition, participants may receive a Notice of Plan Termination that includes information on their account balance, distribution options, and information about making an election and providing instructions to the plan. 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. (See table 4 for descriptions of the role of federal agencies and other entities in helping participants find their plan accounts). Even with the information participants received while still active in plans or at separation, they then have to figure out which agencies and private sector entities to contact to find their accounts. Former employers and record keepers have information participants may need, but participants will need to have stayed in contact with their former employers to get that information. Federal agencies may also have some of the information that participants may need. However, the information that agencies provide is not designed to help participants keep track of multiple accounts or to find lost accounts. Consequently, participants searching for their accounts from former employers may have incomplete information. Moreover, if participants kept the notices and statements sent to them, the information they need may be out of date and located in multiple documents. As a result of such information challenges, even those who obtain assistance from benefits advisors with government or non-profit programs may be unable to locate all of their retirement savings. The Social Security Administration (SSA) provides information that can help participants locate retirement savings left with a former employer. The Potential Private Retirement Benefit Information (Notice) includes information that could be beneficial to individuals looking for missing accounts, including: the name of the plan where a participant may have savings, the plan administrator’s name and address, the participant’s savings balance, and the year that the plan reported savings left behind (see fig. 7). SSA sends the Notice when an individual files for Social Security benefits, which can occur as early as age 62, unless the notice is requested earlier. Individuals appear to be generally unaware that this personal financial information exists or that they may request it from SSA, since few individuals request the form prior to retirement. SSA officials said that they only received about 760 requests for the form in 2013, though according to data provided by SSA the agency has records of potential benefits for over 33 million people. Agency officials told us that they were not aware of any potential advertising or effort on the agency’s website (www.ssa.gov) for promoting the availability of the Notices or informing people about their ability to request the notices. Officials also said that approximately 70,000 Notices are generated for new Social Security beneficiaries every month. Individuals may receive multiple Notices at retirement if they have left savings in more than one employer plan over their career. Although the same information is reported on each form and SSA houses the data for years, the data are not compiled for ease of use by the recipient or for efficiency and cost-savings by the agency. Agency officials explained that in the past people worked for one company for most of their lives and were more likely to have had a traditional defined benefit pension plan, and consequently the format of the Notice only allows for data from one employer. Because the Notice is not currently formatted to display consolidated data on potential benefits from multiple employers, information on benefits from each employer must be sent separately to the participant. Given that many individuals will change jobs often throughout their working life, they can therefore expect to receive several different Notices, adding to the number of disclosures, communications, and notices they are expected to review, understand, and consider in managing their retirement savings. Combining multiple Notices could simplify the process of managing multiple forms for people with more than one account and reduce the costs to SSA. More widely known, SSA also sends individuals a Social Security Statement (Statement) that estimates Social Security retirement benefits—at different claiming ages, and displays a worker’s earnings history. SSA suspended the mailing of paper copies of the Statement in 2011, but in 2014 resumed mailing the Statements to individuals every 5 years, starting at age 25. This information is also available online to anyone who establishes an account. Similar to the Notice, the Statement contains important information about an individual’s potential retirement income. Together these documents give individuals a more complete understanding of their income in retirement. SSA also has earnings recorded by employer, which is available upon request, but it is not mailed to individuals or available online. The earnings record for each year could provide clues as to when certain periods of employment occurred, which is key information that industry professionals suggest individuals looking for their lost 401(k) plan accounts should have when conducting a search. Given the multiple Notices individuals can receive from SSA, in addition to the Statement, finding a way to reduce duplication can help individuals keep track of their accounts and locate missing accounts. SSA has a process in place to review and revise the Statement and the agency already stores all of the data published in the Notice. As suggested in figure 8, providing the Notice at the same time as and with the Statement is one way to give individuals a consolidated, timely resource and reduce the volume of paperwork they need to keep track of over time. As noted earlier, when plans lose track of participants due to outdated mailing addresses, participants fail to receive critical plan communications about their accounts and about any changes to the plan name or administrator that will be vital when they want to communicate with the plan and claim their benefits. An industry professional we interviewed suggested that participants receive some type of reminder to notify plans of address changes. If participants are reminded of their inactive 401(k) plan accounts via the Notice and prompted to inform plans of updated address information, the accounts may be less likely to become lost. Making the information available online or mailing it every 5 years can remind participants of the multiple accounts they have. Providing the combined information on inactive accounts from multiple employers can also give individuals needed information to keep track of their multiple accounts and provide the opportunity to correct inaccurate account information. In addition, having a reminder of the accounts they left behind may increase the likelihood that participants pay attention to other plan communications. To manage inactive workplace retirement accounts, officials in the countries in our study told us that the United Kingdom (U.K.), Switzerland, and Australia use forced transfers and Australia, Denmark, Belgium and the Netherlands use tracking tools. Like the forced-transfer IRAs of the United States, the forced transfers we were told about in these countries transfer account balances without participant consent. In the countries we studied with forced transfers, those accounts follow participants changing jobs, are efficiently managed in a single fund, or are free from fees at a government agency. Each of these approaches helps to preserve the real value of the account for the participant, and generally ensures workplace plans will not be left with the expenses of administering small, inactive retirement 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. Approaches include both databases and “service bus” interfaces connecting providers to participants in real time. Roles for government in these countries range from holding the data and analyzing it for tax and social policy purposes to collaborating with an industry-created pension registry, allowing for information on national pension benefits to be provided in the registry. According to officials we interviewed in the three countries that use forced transfers, they have legislation that (1) consolidates transferred accounts, either in a participant’s new plan or with other forcibly-transferred accounts, and (2) enables these accounts to grow, either at a rate comparable to participants’ current retirement accounts or at least in pace with inflation (see table 5). 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. 9). The Substitute Plan serves as a back-up in those instances when participants fail to roll their money over to their new plan, as they are required to do by law, according to Swiss Federal Social Insurance Office officials. Plans report information on inactive accounts to the Guarantee Fund, the Swiss organization insuring insolvent workplace plans. After 2 years of inactivity, those accounts must be transferred to the Substitute Plan. Officials said the Guarantee Fund is responsible for returning the retirement savings of participants to them in retirement. According to officials at the Swiss Federal Social Insurance Office, the Substitute Plan held about $5.5 to $6.6 billion in 2014. They said its investments have outperformed those in workplace plans in recent years, and compared to most workplace plans, its administrative costs are low, in part because the board manages the investments itself. According to a Substitute Plan board member, the board receives investment guidance from financial experts who counsel its investment committee. The United Kingdom—Officials said that the United Kingdom “pot- follows-member” law is designed to make workplace retirement accounts move with participants throughout their career, or at least until the balances are large enough that they could be used to buy an annuity. Transfers of participants’ savings from a former employer are initiated by the new employer when it is notified, likely through information technology, of an eligible account. Although every employer in the United Kingdom must automatically enroll workers between age 22 and retirement age who earn more than about $17,000 a year, U.K. officials are still considering how they will implement the law when no new plan exists to transfer money to. They said one benefit of putting the responsibility on the new plan is that the trigger for the transfer does not occur until a new plan exists. Once implemented, the pot-follows-member law will automate the plan-to-plan rollover process for participants, keep transferred assets under participant direction, and generally ensure plans do not manage small, inactive accounts. Figure 10 depicts three ways workplace retirement accounts can follow job-changing participants. Australia—Rather than invest forcibly transferred accounts for long-term growth, officials told us the Australian government preserves value while taking proactive steps to reconnect participants with their accounts. Accounts inactive for 1 year are transferred to the Australian Tax Office (ATO), which holds them in a no-fee-environment and pays returns equal to inflation when they are claimed.website to submit their taxes or change their address, they are provided a link to view any account they have that is held by the ATO, and they can consolidate it with another account online. Unlike the United Kingdom and Switzerland, the Australian approach requires participants to take action to invest their transferred accounts for long-term growth, although it provides a tool to help them do so. European Commission officials we talked to said that the most basic form of centralized information on plans should help participants find providers, allow them to view which plans serve which employers, and provide relevant plan contact information. All of the approaches we reviewed in the selected countries went further. The Netherlands, Australia, and Denmark provide consolidated, online information—called pension registries—to participants on all of their workplace retirement accounts, and Belgium is scheduled to do the same by 2016. The pension registry designs in the four countries we studied with such registries share some common elements that make them useful for participants. Active and inactive accounts: All include data on both active and inactive accounts, including account balances and plan or insurer contact information. Website accessibility: All include the identity authentication necessary to securely allow online access to individual participants. Workplace account information: All include information on workplace retirement accounts. While various benefits to participants were cited as the impetus for creating registries in each of these countries, pension registries can be used by plans as well. A representative of one workplace plan in Belgium said they use pension registry data to find missing participants, make payments to the participant as planned, and eliminate liabilities for those payments. The representative also added that when the pension registry goes live to participants the plan may spend less time answering questions from participants who do not have a clear understanding of their rights to benefits. 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. Table 6 shows various attributes of the pension registries in the countries we included in our study. Further details on these pension registries can be found in appendix VII. Denmark—Denmark’s pension registry incorporates personal retirement accounts similar to IRAs in the United States, and facilitates retirement planning by allowing participants to see how their financial security in retirement varies with factors like retirement age and spend-down option, according to documentation provided by Danish officials. Although the Danish pension registry is a private non-profit organization financed by participating pension providers, it also works with the government to provide data on public retirement benefits (see fig. 11). The Netherlands—Participants have had access to the pension registry since 2011 using a national digital ID, following the enactment of legislation in 2006 and 2008. The Dutch Social Insurance Bank worked for years with the largest pension plans to develop the registry, though the pension industry in general—including insurance companies and smaller pension funds—provided input into the registry, according to industry representatives we interviewed. The pension industry’s web portal collects and consolidates pension information from funds and insurers when a participant logs in to the system. Participants can also access national, or government, pension information. The pension registry does not store the information in a central location because of security concerns over participants’ private information, according to representatives of the pension registry we interviewed. The government plans to expand the pension registry into a pension dashboard that will project retirement benefits under various life events and allow participants to view their entire financial situation to facilitate retirement planning. The aim of the expansion is to increase financial literacy but also affect behavior. Australia—Participants can access the pension registry, the SuperSeeker, online using a unique electronic government ID. Participants can also use a phone service or smart phone application to get the information, according to the SuperSeeker website. With SuperSeeker, participants can view all of their workplace retirement accounts on the web, including active and inactive accounts, and any lost accounts held by ATO. SuperSeeker can also be used to locate lost accounts not held by ATO. The content of the registry is generated by plans, as they are required to report the details of all lost accounts twice each year to the ATO, in addition to active accounts. Belgium—Officials told us individual participant access is planned for 2016 using a national digital signature. They said the law creating the workplace pension registry was passed in 2006. Pension providers are required by law to submit workplace pension information to the registry. An electronic database of national pensions (similar to Social Security in the United States) already existed for private sector workers and in 2011, the government included public sector workers in the database to create a unified national and workplace pension registry. Starting in 2016, all participants will be able to securely access the integrated data on both national and workplace retirement plans, according to Belgian government officials. European Commission officials told us Denmark has the most advanced pension registry and, as such, is a model for an international registry accessible by participants across the European Union. With a population of over 500 million in 28 member states, the European Union is more similar to the United States in terms of population and geographic size than the individual countries we included in our study, thus the challenges the European Union faces in setting up a pension registry may be particularly relevant for the United States. By creating a pan-European pension registry, European Commission officials said they aim to ensure that workers moving across borders do not lose portions of their retirement entitlements accrued in different jobs and countries. According to European Union data, more European workers are internationally mobile in the labor market, with the number of economically active European Union citizens working across borders having increased from 5 million in 2005 to 8 million in 2013. Their accumulated retirement benefits are scattered over several countries, making it difficult for participants to keep track of them, and for providers to locate missing participants. Because some countries in Europe already have pension registries, European Commission officials said a European registry may involve linking existing registries together. To this end, the European Commission has hired a consortium of six experienced pension providers from the Netherlands, Denmark, and Finland to study possible approaches and come up with a pilot project on cross-border pension tracking. This Track and Trace Your Pension in Europe project presented its initial findings in support of a European Tracking Service to the European Commission. The track and trace project found no uniform approach to pension tracking in the European Union. Although 16 countries report having a national pension tracking service, according to track and trace project documentation, these vary substantially in terms of functionality, coverage, service level, and complexity. The European Commission expects to face challenges implementing a pension registry in the European Union because tax laws and languages vary from country to country. European Commission officials said they face several challenges: the standardization required for all plans in all European Union countries to interface with the same system, the data security required for all those involved to trust the system, and questions about how the system would be financed. For example, according to the track and trace project’s initial findings, few countries have a standardized format on pension communication, though most report having legal requirements for providers to inform participants on a regular basis. These differences across countries reflect the different levels of maturity of the pension systems across Europe. European Commission officials noted it is likely to take many years to standardize data. However, as representatives of the Dutch Association of Insurers pointed out, unless the trend of increasingly frequent job changes reverses, a pension registry will only become more important in the future. Currently, there is no national pension registry in the United States. No single agency or group of agencies have responsibility for developing a pension registry for participants looking for their accounts, and no coalition of financial firms in the retirement industry has acted alone in lieu of government involvement. While projects to provide access to current, consolidated information on workplace retirement accounts are complete or in the final stages in other countries, the United States has not undertaken a coordinated effort to determine how to provide the same to Americans. The current piecemeal approach involving the Department of Labor (DOL), the Pension Benefit Guaranty Corporation (PBGC), Health and Human Services (HHS), and the Social Security Administration (SSA) is largely reactive. Participants often turn to DOL, HHS, or PBGC for assistance once their accounts are lost, and SSA generally only provides information once participants have reached retirement age. The current approach also requires a high level of participant engagement with complex financial information. The current state of financial literacy in the United States and the field of behavioral economics suggest that this kind of participant engagement should not be expected. As discussed earlier, the task of tracking down retirement savings is a substantial challenge for participants who may lack information that would allow other entities to help them find accounts. Similarly, the inactive account information SSA provides pertains to “potential” benefits, leaving the participant to determine whether they exist or not. The pension registries in the countries we reviewed are relatively proactive, and rely less on participant engagement. Their approach of providing access to current, consolidated information on all workplace retirement accounts may help prevent an account from being lost, and the need for a participant to work with government to find it. That approach also relies less on participants, as they need not keep records or update their address with plans to ensure they can later receive their benefits. For example, Australia was able to develop a registry that allows a participant to consolidate their benefits online on a single website, without engaging directly with either plan or calling a government funded assistance program. Congress is aware of the problem participants have tracking accounts, and the Pension Protection Act of 2006 expanded PBGC’s Missing Participant Program. Two industry associations have also suggested that a central database be created that participants can check to determine whether they have a lost account in any ongoing plan in addition to any from terminated plans. Some of the groundwork for consolidating various pieces of information is already in place in the United States through large service providers that manage data on thousands of plans and millions of account holders. For example, information on retirement savings in many IRAs, workplace plans, and Social Security is already accessed online. While the U.S. retirement system is different from those in the countries with pension registries we studied, and the appropriate scope, oversight, and financing method for a pension registry in the United States have not been determined, the variety of examples in place in the countries we reviewed provide ideas to consider. Currently, DOL and other federal agencies do not have any ongoing efforts to develop such a registry. Until there is a concerted effort to determine the potential for a U.S. pension registry, it may be premature to say whether U.S. workers can benefit from the same information as participants in some other countries. The United States has a highly mobile labor force and an economy marked by frequent business formations and failures. The accessibility and portability of the U.S. account-based 401(k) plan system presumably allow participants to retain and manage their retirement assets throughout their careers, even with multiple job changes. However, there are some significant limitations with regard to portability and information access as a result of the current structure and rules of the 401(k) plan system. Given the expected continued growth of this system and the expansion of automatic enrollment, the number of inactive participants and inactive accounts—and the associated challenges—will almost certainly grow, exacerbating inefficiency and eroding the retirement security of U.S. workers. Under current law, there is no mechanism in place that would allow plans or regulators to develop or consider additional default destinations when employees are forced out of 401(k) plans. Although other countries’ approaches pose implementation challenges within the United States, there may be ways that DOL and Treasury, if given the authority to do so, can revise the current forced-transfer model to help achieve better financial outcomes for participants while still providing plans with administrative relief. Another way to protect participants’ 401(k) plan savings is by ensuring that all accounts with balances over $5,000 may remain in the plan environment, even when portions of those balances are from rollovers. Current law addresses the needs of plans and participants by alleviating the burden on plans of maintaining small, inactive accounts, while protecting participants with large balances from forced transfer. Changing the law so that active plans can no longer force-transfer accounts with balances over $5,000 by disregarding rollovers can extend current protections to all accounts of that size, while at the same time continuing to provide plans relief from maintaining small, inactive accounts. Regardless of the size of the balance that is transferred into a forced- transfer IRA, one way to partially mitigate the problems with these accounts is to broaden the investment options for these accounts from the limited conservative menu currently available. DOL can take steps to expand the menu of investment options available under its safe harbor regulations, to include alternatives similar to those available to automatically enrolled 401(k) plan participants. This would enable forced- transfer IRAs to be better protected from erosion by fees and inflation and provide better long-term outcomes for participants. Workforce mobility and frequent changes in corporate structure can result in forgotten accounts, missing participants, and ultimately, lost retirement savings. Participants often have difficulty locating accounts in plans with former employers, especially those employers that have undergone some type of corporate restructuring. SSA holds critical information on accounts left in former employers’ plans, but individuals rarely see that information before retirement and may be unaware that the information exists. As time passes, the information can become outdated and, therefore, less useful to participants trying to locate their retirement savings. Making this information easier to access and available sooner—such as by using the online system for Social Security earnings and benefit statements—can provide participants with a timelier reminder of accounts left in former employers’ plans and provide them better opportunities for keeping track of accounts and improving their retirement security. The lack of a simple way for participants to access information about their retirement accounts is a central problem of our current workplace retirement system. We found that other countries with robust private account-based retirement systems have been grappling with this challenge and have determined that pension registries can provide a meaningful long-term solution. Creating an accurate, easy to access, and easy to use pension registry in the United States would need to take into account important design challenges, including the scope of the data to be included, the entity that would oversee the registry, and how it would be financed. Designing a registry would also require serious discussions among the key stakeholders, including industry professionals, plan sponsor representatives, consumer representatives, and federal government stakeholders on what such a system should look like in the American context. However, the creation of a viable, effective registry in the United States could provide vital information regarding retirement security in a single location to millions of American workers. 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. Permit the Secretary of Labor and the Secretary of the Treasury to identify and designate alternative default destinations for forced transfers greater than $1,000, should they deem them more advantageous for participants. 2. 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. To ensure that 401(k) plan participants have timely and adequate information to keep track of all their workplace retirement accounts, we recommend that the Social Security Administration’s Acting Commissioner make information on potential vested plan benefits more accessible to individuals before retirement. For example, the agency could consolidate information on potential vested benefits, currently sent in the Potential Private Retirement Benefit Information notice, with the information provided in the Social Security earnings and benefits statement. To prevent forced-transfer IRA balances from decreasing due to the low returns of the investment options currently permitted under the Department of Labor’s safe harbor regulation, we recommend that the Secretary of Labor expand the investment alternatives available. For example, the forced-transfer IRA safe harbor regulations could be revised to include investment options currently under the qualified default investment alternatives regulation applicable to automatic enrollment, and permit forced-transfer IRA providers to change the investments for IRAs already established. To ensure that individuals have access to consolidated online information about their multiple 401(k) plan accounts, we recommend that the Secretary of Labor convene a taskforce to consider establishing a national pension registry. The taskforce could include industry professionals, plan sponsor representatives, consumer representatives, and relevant federal government stakeholders, such as representatives from SSA, PBGC, and IRS, who could identify areas to be addressed through the regulatory process, as well as those that may require legislative action. We provided a draft of this report to the Department of Labor, the Social Security Administration, the Department of the Treasury, the Internal Revenue Service, the Pension Benefit Guaranty Corporation, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau. DOL, SSA, Treasury and IRS, PBGC, and SEC provided technical comments, which we have incorporated where appropriate. DOL and SSA also provided formal comments, which are reproduced in appendices VIII and IX, respectively. CFPB did not have any comments. DOL agreed to evaluate the possibility of convening a taskforce to consider the establishment of a national pension registry. We appreciate that DOL shares our concerns and agrees that there is need for a comprehensive solution to problems related to missing and unresponsive participants. DOL stated, however, that it does not have the authority to establish or fund a registry. Specifically, DOL noted that it does not have authority to require reporting of the information needed for a registry or to arrange for the consolidation of retirement account information from multiple agencies. We reached the same conclusion and for that reason recommended a taskforce as a starting point for the development of a national pension registry. In fact, our recommendation noted that one role for the taskforce would be identifying areas that could be addressed through the regulatory process and those requiring legislative action. DOL also noted that an expansion of PBGC’s missing participant program to include defined contribution plans could address some of these issues. It is our view that there may be a number of policies or programs that could address these problems and we agree that an expansion of PBGC’s program could ultimately be part of a comprehensive solution. Should the taskforce determine that the most appropriate option or options require additional authority for DOL or other agencies, such options should be given careful congressional consideration. DOL disagreed with our recommendation to expand the investment alternatives available under the safe harbor for plan sponsors using forced transfers. While DOL characterized our recommendation as calling for the safe harbor to include qualified default investment alternatives, our recommendation is to “expand the investment options available” and we noted that qualified default investment alternatives could be one option. DOL stated that the limited investments under the safe harbor are appropriate because Congress’ intent for the safe harbor was to preserve principal transferred out of plans. Particularly, DOL noted that given the small balances and the inability of absent participants to monitor investments, the current conservative investment options are a more appropriate way to preserve principal. However, as we show in the report on pages 9-13, the current forced- transfer IRA investment options like money market funds can protect principal from investment risk, but not from the risk that fees (no matter how reasonable) and inflation can result in decreased account balances due to returns on these small balance accounts not keeping pace with fees. Consequently, as our analysis shows and as several forced-transfer IRA providers told us, the reality has been that many forced-transfer IRAs have experienced very large and even complete declines in principal. Regarding our analysis, DOL stated that the performance information that we used to illustrate the effects of low returns on forced-transfer IRAs on pages 9-13 and 20-21 covers too short a period and does not reflect the periodic higher returns earned by money market funds in the more distant past. Our projection in figure 2, p.13, showing the effect of returns from a money market investment versus a target date fund investment on a small balance over 30 years used 10-year mean returns for these investments. Given that the safe harbor for these accounts was issued 10 years ago in 2004, we feel a 10-year average is more appropriate and accurately reflects the returns earned. However, using a longer time period does not materially change our conclusions. A similar calculation using a 15-year mean return shows that these forced-transfer IRA accounts would still not be preserved. (See notes under fig. 2, p.13, and fig 5, p.20-21.) In any case, our recommendation did not aim to eliminate money market funds from investments covered by the safe harbor but to expand the investment alternatives available so that plans and providers that want to operate under the safe harbor have the opportunity to choose the most suitable investment. We stand by our recommendation and encourage DOL to expand the safe harbor to include investment alternatives more likely to preserve principal and even increase it over time. Qualified default investment alternatives could be one option, although certainly not the only one, that could be considered. SSA disagreed with our recommendation to make information on potential private retirement benefits more accessible to individuals before retirement. SSA was concerned that our recommendation would place the agency in the position of having to respond to public queries about ERISA. SSA noted that the agency has no firsthand legal or operational knowledge of pension plans or the private pension system and should not be in a position of responding to questions of that nature or about ERISA, which it considered to be outside the scope of SSA’s mission. We agree with SSA’s view about providing information or advice about private pension plans generally. However, as SSA noted, the Notice of Potential Private Retirement Benefit Information (referred to as the “ERISA notice” in SSA’s letter) already directs recipients to contact DOL with any questions. We would expect that any changes made to make information on potential vested plan benefits more accessible to individuals before retirement would continue to direct recipients to contact DOL with questions about ERISA policy. SSA stated that it will seek legal guidance to determine if it is permissible to include a general statement encouraging potential beneficiaries to pursue any external pension benefits in its benefit Statement. As noted in our report on pages 30-31, individuals may be unaware of the availability of information on potential retirement benefits, therefore we support SSA’s initiative to include language in the Statement encouraging potential beneficiaries to pursue external pension benefits. SSA also stated that there is no interface between potential private retirement information and Social Security benefits. However, as noted in our report on page 31, SSA already stores the potential vested benefits data and provides the information in the Statement. Consolidating the two types of information and making it available every 5 years can provide participants with timely and adequate information to keep track of all of their work place retirement accounts and could possibly lead to administrative efficiencies. Therefore, it may be appropriate for SSA to explore its concern about its legal authority to expend appropriated funds to disclose information that it already provides to the relevant beneficiary, on a more frequent basis and in a more consolidated manner. We continue to believe that this recommendation could enhance the retirement security of millions of Americans, who would benefit from the assistance in keeping track of their multiple accounts from multiple employers and becoming more knowledgeable about funds they may be due in retirement. Should SSA determine that they have authority to implement this legislation, we would strongly urge the agency’s action. However, should SSA decide that it does not have the authority to move ahead on this recommendation, we would urge the agency to seek the necessary statutory authority. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Labor, Acting Commissioner of the Social Security Administration, Secretary of the Treasury, Commissioner of Internal Revenue, Acting Director of the Pension Benefit Guaranty Corporation, Chair of the Securities and Exchange Commission, Director of the Consumer Financial Protection Bureau, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-7215 or jeszeckc@gao.gov Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix X. 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 understand what happens to forced-transfer IRAs over time, as well as challenges 401(k) plan participants face keeping track of multiple 401(k) plan accounts, we reviewed relevant data from government, research, and industry sources. Because we found no comprehensive data on the number of IRA accounts opened as a result of forced transfers or other data relevant to their use and management, we collected data from a non-generalizeable group of 10 providers of forced-transfer IRAs about their practices and outcomes, including three of the largest IRA providers. There is no comprehensive list of all forced-transfer IRA providers. For this reason, we built a list of forced-transfer IRA providers through interviews with industry professionals, a review of IRA market data, and online searches. Our objective was to create a group that would cover a large share of assets in the forced-transfer IRA market and represent both small and large forced-transfer IRA providers in terms of company size. We reached out to the largest IRA providers by assets under management, as well as all small forced-transfer IRA providers on our list. We obtained forced-transfer IRA account data from 10 forced-transfer IRA providers that represent this mix of characteristics. We also interviewed plan sponsor groups, 401(k) plan industry groups, research entities, consumer groups, and six federal agencies (Consumer Financial Protection Bureau, Department of Labor, Department of the Treasury, Pension Benefit Guaranty Corporation, Securities and Exchange Commission, and Social Security Administration) about plans’ use of forced-transfer IRAs and what challenges individuals and plans face related to inactive accounts and multiple accounts in the United States. We also reviewed research and industry literature, relevant laws and regulations, 2013 ERISA Advisory Council testimony on missing participants, industry whitepapers on a proposed default roll-in system, and submissions to the 2013 Pension Benefit Guaranty Corporation request for information related to a tracking system for distributions from terminating plans. To understand what happens to forced-transfer IRA accounts over time, we constructed projections of what would happen to an account balance year to year, given certain assumptions. We drew those assumptions from the actual forced-transfer IRA account terms provided by providers we interviewed and on which we collected data. We used the account opening fee, annual fee, search fees, and rate of investment return to project how long it would take for a $1,000 balance to decrease to zero. While the range of average balances transferred into forced-transfer IRAs reported by providers we interviewed was $1,850 to $3,900, we used a $1,000 balance for our projection to make it easier to observe the difference in values over time shown in the projection. Appendix III shows the projected outcome for a $1,000 balance given the fee and return information reported by the forced-transfer IRA providers we contacted. To determine how forced-transfer IRAs are used, as described in appendix II, we projected the balance of a typical low-wage worker at the end of a typical tenure given certain assumptions about savings, investment returns, and employer matching and vesting policies. Specifically, we wanted to see if the projected balance would fall below the $5,000 cap used to determine eligibility for forced transfers. The projections assume the annual mean wage in 2013 for the service sector occupation with the most workers, specifically “food preparation and serving related occupations,” including an annual raise equal to the average annual increase in wage over 15 years (1999-2013). For these assumptions, we referred to the U.S. Bureau of Labor Statistics’ (BLS) Occupational Employment Statistics, National Employment and Wage Estimates. The Occupational Employment Statistics survey covers all full- time and part-time wage and salary workers in nonfarm industries. The survey does not cover the self-employed, owners and partners in unincorporated firms, household workers, or unpaid family workers. We assumed the 2014 median tenure for employed workers in the food preparation- and serving-related occupations, according to BLS data. We also assumed that employer contributions, when there were any, were made concurrently with employer contributions, rather than on a separate periodic or annual basis. These projected savings also reflect a 6.3 percent investment return, which is the geometric mean of 10-year returns for all target date funds according to our analysis of data from Morningstar.com. Target date funds are the most common default investment for individuals automatically enrolled into 401(k) plans, according to the Plan Sponsor Council of America’s (55th) Annual Survey of Profit Sharing and 401(k) Plans, which reflects the 2011 plan experience. We used optimistic, moderate, and pessimistic assumptions to project vested balances (see appendix IV for additional details on our assumptions). To estimate the number and the value of accounts that could potentially be—but were not already—transferred to forced-transfer IRAs, we collected Social Security Administration (SSA) data from the form 8955-SSA. Data on the form 8955-SSA include deferred vested benefits in all defined contribution plans, including 401(k) plans, as well as in defined benefit plans, which are not subject to forced transfers. We assessed the reliability of the data and found that it met our standards, given our use of the data. We previously reported that data from the form 8955-SSA on potential private sector pension benefits retirees may be owed by former employers are not always updated or verified over time and may not reflect later distributions from plans, such as rollovers to a new plan or cash-outs. We also asked PLANSPONSOR.com to include questions about plan sponsors’ use of forced transfers in its newsletter, which is distributed to online subscribers. Respondents to the query included 14 plan sponsors and 4 third-party administrators/record keepers. To assess the reliability of the data we analyzed, we reviewed IRA market data and interviewed IRA providers familiar with forced- transfer IRAs. We determined that these data were sufficiently reliable for the purposes of this report. 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. We also reviewed research and industry literature, relevant laws and regulations, 2013 Employee Retirement Income Security Act Advisory Council testimony on missing participants, industry whitepapers on a proposed default roll-in system, and submissions to the 2013 PBGC request for information related to a tracking system for distributions from terminating plans. To examine how other countries are addressing challenges of inactive accounts, we selected six countries to study. We considered countries with extensive workplace retirement systems to include populations that might face challenges similar to those of U.S. participants. To make our selections, we reviewed publicly available research and interviewed researchers, consumer groups, industry groups, and government agencies. We considered the extent to which countries appeared to have implemented innovative policies to help individuals keep track of their retirement savings accounts over their careers, reduce the number of forgotten or lost accounts, make such accounts easier to find, and improve outcomes for those with lost accounts. We also considered how recently legislated or implemented solutions were adopted given the increasingly powerful role information technology can play in connecting individuals with information. 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. We interviewed government officials and industry representatives from all the selected countries. We did not conduct independent legal analyses to verify information provided about the laws or regulations in the countries selected for this study. Instead, we relied on appropriate secondary sources, interviews, and other sources to support our work. We submitted key report excerpts to agency officials in each country for their review and verification, and we incorporated their technical corrections as necessary. We conducted this performance audit from May 2013 to November 2014 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for findings and conclusions based on our audit objectives. Active plans force out separated participants primarily to reduce plan costs, administrative burden, and liability. In response to a poll conducted by PLANSPONSOR.com through its newsletter, some respondents (made up of both plans and third party administrators) indicated that plans chose to use forced transfers for balances of $5,000 or less because they wanted to reduce costs from having additional participants who have small accounts. Specifically, plans pay fees based on the total number of participants or on the average plan balance. The administrative burden on plans is another incentive to force out participants with inactive accounts, absent participant instruction, into forced-transfer IRAs. Other respondents to PLANSPONSOR.com’s query reported that they used forced transfers because they wanted to reduce the complexity and administrative responsibilities associated with locating separated, non cashed-out participants. Also, small plans may wish to avoid the additional disclosure requirements and expenses associated with separated employees. In addition, active plans may opt to force out separated participants with eligible balances to reduce the plans’ legal liability related to those individuals. Lastly, plans also use forced-transfer IRAs to help reduce their ongoing responsibility with regard to uncashed checks. When transferring an account into a forced-transfer IRA, a plan must first notify the participant of its intention to forcibly transfer the account and that if the participant does not instruct otherwise, the account will be transferred into a forced-transfer IRA. An example of such a notice is shown in appendix V. See figure 12 for an example of how the forced- transfer IRA process works for active 401(k) plans. Although a plan must try to locate a missing participant before seeking to force the participant out of the plan, actually forcing such a participant out of the plan and initiating the forced transfer to an IRA does not require any additional last-ditch efforts to locate the participant. For example, a plan might get back some returned plan communications mailed to a separated participant and search unsuccessfully for an updated address. Later, when that plan sweeps out the balances of separated participants, the plan is not required to search again for the missing participant. Instead, efforts to locate the missing participant are at the discretion of the provider and generally at the expense of the individual participant’s balance. One industry survey shows that about half of active 401(k) plans force out separated participants with balances of $1,000 to $5,000. We collected forced-transfer IRA account data from 10 IRA providers that have, together, opened more than 1.8 million forced-transfer IRA accounts totaling $3.4 billion in retirement savings, as of 2013. One of the largest forced-transfer IRA providers has projected that more than 600,000 new forced-transfer IRAs could be created each year, given attrition rates, the percentage of vested balances under $5,000, and the rate of non- responsiveness among separating participants faced with making a distribution choice. 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. Data provided by SSA are consistent with those estimates. From 2004 to 2013, separated participants left more than 16 million accounts of $5,000 or less in workplace retirement plans, with an aggregate value of $8.5 billion. Those data reflect both defined contribution and defined benefit plans, but even if a portion of the accounts are in defined contribution plans, it suggests that there are millions of accounts and billions in savings that could be transferred to IRAs if those plans choose to retroactively force transfer eligible accounts. Although the plans reflected in SSA’s data had not yet forcibly transferred these small accounts, the defined contribution plans may still do so. For example, a plan may choose to sweep out eligible accounts once a year or on some periodic basis. Plans’ use of forced-transfer IRAs is also increasing. Some forced- transfer IRA providers have seen the number of new forced-transfer IRAs increase each year. In addition, the largest of the specialty providers we interviewed said that the number of new forced-transfer IRAs that they administered increased nearly 300 percent over 5 years, from 26,011 new They expect that upward trend to accounts in 2008 to 103,229 in 2012.continue. Industry professionals also said that the wider use of automatic enrollment has the potential to result in greater use of forced-transfer IRAs, as participants who are relatively unengaged, and thus less likely to make a choice about where to transfer their savings, are forced out by plans when they separate. Finally, some plans do not yet force out participants because their plan documents do not, as required, include provisions for forcing them out and transferring their eligible 401(k) plan accounts into forced-transfer IRAs. The PSCA survey of 401(k) plans stated that about 40 percent of plans do not currently force out participants with balances of $1,000 to $5,000. If these plans begin to use forced transfers, they can force out participants with eligible balances going forward and go back and sweep out participants who left small accounts years ago. Thus, anyone with a small balance left with a past employer’s 401(k) plan could find themselves notified of the plan’s intention to force them out—no matter how long ago their separation—and of a potential transfer to an forced- transfer IRA. Several forced-transfer IRA providers we spoke with said that forced transfers from terminating plans represent a small part of their forced- transfer IRA business. For example, one provider said that terminated plan transfers constitute 9 percent of the provider’s forced-transfer IRAs. Some providers do not offer forced-transfer IRAs to terminating plans. One of the largest providers told us that it offers forced-transfer IRAs as an accommodation to ongoing plan sponsor clients, but typically does not offer them if the plan is terminating. In some cases, forced-transfer IRA providers will provide the accounts for terminating plans that cannot secure a contract with a larger service provider. Despite the limited use of forced-transfer IRAs by terminating plans, they have prescriptive requirements for notifying participants prior to the forced transfer of balances, which include using certified mail, reviewing other employee benefit plan records for more up-to-date information, and contacting the designated beneficiary to get more accurate contact information. As a result, participants in terminating plans are more likely to have an opportunity to select a distribution destination other than a forced-transfer IRA or individual retirement annuity. Through interviews, data requests, and web research we collected forced-transfer IRA terms for 10 forced-transfer IRA providers. Almost all providers offer varying account terms for different forced-transfer IRAs. In all, there were 19 different account terms from the 10 providers for which we collected data. We collected data on account opening fees, initial address search fees, ongoing account fees, ongoing address search fees, and investment returns. Some forced-transfer IRA providers also charge fees for certain transactions, including distributions and account closings, but we did not incorporate them into our projections, which show the effect of the account terms if the account holder takes no action and the balance remains in the forced-transfer IRA. While not all forced- transfer IRA terms result in the balance decreasing to $0 over 30 years, the growth of those account balances is less than would have resulted had the funds been invested in a typical target date fund. In contrast to the projected outcomes shown in table 7, the projected balance of $1,000 in a forced-transfer IRA with a $6.75 set-up fee, a $42 annual fee (the median fees among the combinations we reviewed), and a 6.30 percent would be $2,708 after 30 years or growth of average target date return,173 percent. Appendix IV: Projected Vested Retirement Savings of a Low-Wage 401(k) Plan Participant Given Pessimistic, Moderate, and Optimistic Assumptions (Table) Immediate vesting 3-year cliff vesting 5-year graduated vesting 6-year graduated vesting $3,185 Under 3-year cliff vesting, the employer’s contribution and investment returns thereon are 100 percent vested after 3 years of service. Under graduated vesting, the employer’s contribution and investment returns thereon are partially vested after each year of service, depending on how long the graduated vesting period is. In our projections, we used: for a 5-year vesting schedule: 0, 25, 50, 75, 100 percent and the ends of years 2 through 5; and for a 6-year gradated vesting schedule:0, 20, 40, 60, 80, and 100 percent at the end of years 2 through 6. Appendix VI: Selected Reporting and Disclosure Requirements at Participant Separation and Certain Plan Events(Table) Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc, 26 U.S.C. § 6047(d). 26 C.F.R. § 31.3405(c)-1. 402(f) Special Tax Notice (or Rollover Notice), 26 U.S.C. § 402(f)(1) Participant *Only required for balances over $5,000. Notice of Right to Defer Distribution (Or Participant Consent Notice), 26 C.F.R. § 1.411(a)-11(c) . 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, 26 U.S.C. § 6057(a). Includes same information as the 8955-SSA; plan name, name and address of plan administrator, name of participant, nature, amount and form of the deferred vested benefit. 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc, 26 U.S.C. § 6047(d). 26 C.F.R. § 31.3405(c)-1. Form 402(f) Special Tax Notice (or Rollover Notice), 26 U.S.C. § 402(f)(1) Summary description of form contents Explains the tax implications of the different distribution options, including explanation of the rollover rules, the special tax treatment for cash- outs (also called lump-sum distributions), and the mandatory withholding of 20 percent of distributions (including those that result in an indirect rollover).Notifies participant that, absent any participant instructions, a distribution will be paid to an individual retirement plan. Reports contributions, rollovers, transfers, and recharacterizations, as well as the fair market value and whether a required minimum distribution is required. 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc, 26 U.S.C. § 6047(d). 26 C.F.R. § 31.3405(c)-1. 402(f) Special Tax Notice (or Rollover Notice), 26 U.S.C. § 402(f)(1) Explains the tax implications of the different distribution options, including explanation of the rollover rules, the special tax treatment for cash- outs (also called lump-sum distributions), and the mandatory withholding of 20 percent of distributions (including those that result in an indirect rollover). Participant *Only required for balances over $5,000. Notice of Right to Defer Distribution (Or Participant Consent Notice), 26 C.F.R. § 1.411(a)-11(c) (2012). 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc, 26 U.S.C. § 6047(d). 26 C.F.R. § 31.3405(c)-1. Form 402(f) Special Tax Notice (or Rollover Notice), 26 U.S.C. § 402(f)(1) Participant *Only required for balances over $5,000. Notice of Right to Defer Distribution (Or Participant Consent Notice), 26 C.F.R. § 1.411(a)-11(c) (2012). Summary description of form contents Explains the tax implications of the different distribution options, including explanation of the rollover rules, the special tax treatment for cash- outs (also called lump-sum distributions), and the mandatory withholding of 20 percent of distributions (including those that result in an indirect rollover). Notifies participant of right to defer receipt of an immediately distributable benefit. To obtain participant’s consent to distribution in excess of $5,000 prior to plan’s NRA, participant must be given a description of the plan’s distribution options and be informed of right to defer distribution and the consequences of failing to defer. Reports contributions, rollovers, transfers, and recharacterizations, as well as the fair market value and whether a required minimum distribution is required. Optional request for a determination on the plan’s qualification status at the time of the plan’s termination. Notifies employees, participants and beneficiaries that an application for determination is being submitted to the IRS and of their right to comment on the plan. Notice must be posted or sent (electronic media permissible) before the application is submitted to the IRS—between 10 and 24 days of the application date. Notifies participants and beneficiaries of the plan’s termination and distribution options and procedures to make an election. In addition, the notice must provide information about the account balance; explain, if known, what fees, if any, will be paid from the participant or beneficiary’s retirement plan; and provide the name, address and telephone number of the individual retirement plan provider, if known, and of the plan administrator or other fiduciary from whom information about the termination may be obtained. See 29 C.F.R. § 2550.404a-3. The notice will be given during the winding up process of the plan termination. Participants and beneficiaries have 30 days from the receipt of the notice to elect a form of distribution. Receiving entity Department of Labor (DOL), IRS, Pension Benefit Guaranty Corporation (PBGC) Form Final Form 5500, Annual Return/Report of Employee Benefit Plan (including any applicable schedules) 26 U.S.C. § 6058(a). 29 U.S.C. § 1024. Summary description of form contents Indicates when all assets under the plan have been distributed when “final return/report” box on the form 5500 is checked. Indicates that all assets were distributed and current value of assets at the date of distribution via schedule H (for plans with 100 or more participants) and schedule I (plans with less than 100 participants). Gives notice of certain plan mergers, consolidations, spinoffs or transfers of assets or liabilities from one plan to another. Each plan with a separate EIN and plan number involved in merger or transfer of assets or liabilities must file. For spinoffs, only plan in existence before spinoff must file. Form must be filed at least 30 days prior to a merger, consolidation, spinoff, or transfers of plan assets or liabilities to another plan. Final Form 5500, Annual Return/Report of Employee Benefit Plan (including any applicable schedules) 26 U.S.C. § 6058(a). 29 U.S.C. § 1024. Indicates when all assets under the plan have been distributed when “final return/report” box on the form 5500 is checked. Indicates that all assets were distributed and current value of assets at the date of distribution via schedule H (for plans with 100 or more participants) and schedule I (plans with less than 100 participants), Schedules H and I also provide the net value of all assets transferred to and from the plan, including those resulting from mergers and spinoffs. Includes the new plan sponsor’s name and address. The Internal Revenue Code (IRC) requires that participants with an eligible rollover distribution have the option to roll their distributions into an IRA or another employer’s tax-qualified plan in the form of a direct rollover. 26 U.S.C. § 401(a)(31)(A). “fees and expenses (including administrative or investment-related fees) outside the plan may be different from fees and expenses that apply to the participant’s account and contact information for obtaining information on such fees.” 73 Fed. Reg. The Economic Growth and Tax Relief Reconciliation Act of 2001 added the notice provision and required the plan administrator notify the distributee in writing (either separately or as part of the § 402(f) notice). Pub. L. No. 107-16, § 657, 115 Stat.38, 135 (codified at 26 U.S.C. §§ 401(a)(31)(B) and 402(f)(1)(A)). In addition, to meet the conditions of DOL’s safe harbor and therefore, be deemed to have satisfied their fiduciary duties with regard to mandatory distributions, plans must provide participants with a summary plan description, or a summary of material modifications, meeting certain requirements. 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). 29 C.F.R. § 2550.404a-2. At a glance Since 2005, individuals in Australia have been able to select a plan (super) of their choosing to which employers they have throughout their career will contribute. However, workers not actively choosing a plan may accumulate accounts in multiple plans selected by their employers. According to Australian Treasury officials, many Australians lose track of their accounts, especially when they change jobs, names, and addresses. Small balances may be eaten away by fees, necessitating forced-transfers to preserve their value. Pension registry The Australian Tax Office (ATO) has established an online tool called SuperSeeker that individuals can use to find lost retirement accounts, via the governmental portal myGov. A smart phone application is also available for accessing the information. Information provided to participants can be used for retirement planning purposes, including consolidation, in order to improve participant retirement security. However, The SuperSeeker does not perform analytical tasks, such as showing retirement outcomes under various scenarios, according to government officials we interviewed. Participants who find lost accounts upon searching for them are able to consolidate them online in a plan of their choice generally within 3 working days. The SuperSeeker now allows paperless “point and click” consolidation. According to ATO, nearly 155,000 accounts were consolidated in 2013-14 with a total value of about AUD 765 million. In addition, the number of lost accounts went down by 30 percent between June 2013 and June 2014. The pension registry is primarily financed through a tax on the superannuation sector, and in some cases such as funding the letter campaign to raise awareness, from general revenue. The tax has fluctuated between AUD 2.4 million in 2002 and AUD 7.3 million in 2011, according to the ATO. At a glance Officials told us participants changing jobs can leave their pension account behind or roll it over (1) to the plan of the new employer, (2) to a “welcome- structure” for outgoing workers often taking the form of a group insurance, or (3) to a qualified individual insurance contract. Sectoral industry plans, negotiated in collective bargaining agreements, allow participants who change jobs but stay in the same industry to keep one retirement account, according to officials. With defined benefit plans, vested benefits in dormant accounts are frozen ( i.e. not subject to further cost of living or wage increases) officials told us, whereas with defined contribution plans, separated participants’ dormant accounts receive the same return as active accounts but the minimum return obligation that the plan sponsor must meet, currently set at 3.25 percent of account balances per year, is frozen. Pension registry The pension registry in Belgium has two components, according to officials: a database of national pensions (similar to Social Security) and one covering workplace retirement accounts, which includes both active and inactive accounts. The pension registry does not have information on personal retirement savings. Since the enactment of legislation in 2006, the Belgian government has been collecting data on workplace accounts for private sector participants and the self-employed, according to officials. The pension registry extracts some information from existing databases (such as the registry of individuals and employers), and data from service providers, officials said. The registry stores some of the information in its database. From 2016, the new pension registry will take over the provision of information on inactive accounts, as indicated in the law adopted in May 2014, according to Belgian officials, and workers with inactive accounts will no longer receive statements from plan sponsors or pension institutions but will be able to consult the registry online. Officials also told us the registry will help the government gather up-to-date information on retirement plans. The government finances the pension registry from general revenue, officials said. Once fully functional, the annual cost of running the registry will be around 3.5 million euro, according to Belgian pension registry officials we interviewed. At a glance Multi-employer industry plans (one plan covers all workers in an industry) allow participants who change jobs but stay in the same industry to use just one retirement account. When individuals change industries, the account remains inactive in the plan, unless the participant takes action to roll it in to the new industry plan, according to Danish officials. Plans sign agreements requiring them to accept transfers requested by participants. Pension registry The Danish Insurance Association’s pension registry called PensionsInfo collects and consolidates retirement savings information from plans and insurers when a participant logs-in, according to materials provided by Danish Insurance Association representatives we interviewed. It stores only the government-issued identification numbers of participants in each plan. Individuals can view contact information for each plan or insurer, which they can use to consolidate accounts. It is voluntary for providers to allow access to their records, but virtually all do, including government authorities who provide information on national (Social-Security-like) retirement benefits. PensionsInfo provides current account balances and projected future distribution amounts for public, workplace and private retirement benefits under various scenarios, for example, comparing lump- sum withdrawals, phased withdrawals and whole life annuities at different retirement ages. Inactive accounts can be flagged for participants in a pop-up window recommending consolidation, according to officials at the Danish Insurance Association. Participants can print or save the consolidated account information for their records, share it with a personal financial advisor, or use it in conjunction with retirement planning software designed to work with it. Insurers and plans voluntarily pay for the pension registry. The fee paid by each is calculated on the basis of the number of participants requesting to view data from them. Recent data from the European Actuarial Consultative Group indicate that the number of unique visitors to the registry has increased from 512,218 in 2010 to 742,426 in 2011 to reach 1,132,488 in 2012. The annual cost of maintaining the pension registry is estimated at 1.5 million euro. At a glance Multi-employer industry plans, in which a single plan generally covers employees in one industry, allow participants who change jobs but stay in the same industry to keep one pension account. According to an Organization for Economic Co-operation and Development Working Paper, about three quarters of workers belong to industry wide multi- employer plans. Pension registry The Netherlands launched the online pension registry in January 2011. The decision to establish the registry was part of the 2006 Pension Act. Participant can see up-to-date pension information on active and also inactive accounts associated with previous employers, including account balances, account numbers and plan contact information. Active account information has to be mailed to participants on an annual basis and inactive account information every 5 years, according to Dutch officials. Recent data from the European Actuarial Consultative Group shows that the number of unique visitors to the registry was 1,500,000 in 2011 and 1,100,000 in 2012. Pension providers, not the government, finance the pension registry at an annual cost of 2.3 million euro or .49 euro per active participant. Officials also said the cost of developing the pension registry was split between the pension fund industry and the insurance schemes industry, based on their share of the workplace retirement plan market. It took about 3 years and cost about 10 million euro to develop the new pension registry, according to Dutch government officials we interviewed. At a glance The Swiss system is an example of how a retirement account can follow a participant as they move from job to job. Participants are required to transfer inactive workplace retirement accounts left with previous employers, according to Swiss government officials we interviewed. There are a variety of defined benefit and defined contribution plan types in Switzerland. As accounts move from plan to plan, conversion rules established in law govern the value of transferred assets. Pension registry There is no pension registry providing consolidated current online workplace retirement account information in Switzerland, according to Swiss government officials. Swiss Officials said when participants need information on a workplace retirement account started at a past employer, they refer to information provided by the employer or plan or contact the Guarantee Fund, which provides insolvency insurance to plans in Switzerland. Participants can contact officials at the Guarantee Fund by phone or e-mail to identify accounts that were forced out of their plan because they were inactive, according to Swiss officials and the Guarantee Fund’s 2013 annual report. Swiss officials said participants can use information on their inactive accounts to roll them over to the plan of their new employer. They said participants are required by Swiss law to transfer their retirement account when they change jobs, and because enrollment is generally mandatory, officials said employers will often help employees roll their money from their old plan to their new plan. Individuals without a new plan are required to purchase a vested benefit account at a bank or insurance company. At a glance Parliament of the United Kingdom adopted The Pensions Act 2014 which will transfer small inactive workplace retirement accounts to an individual’s active plan. Before the legislation, plans had ultimate discretion over whether or not to accept a transfer, according to a U.K. government report, and the onus for pursuing a transfer rested on individuals. Regulations will now be made to automatically transfer workplace retirement benefits, according to a U.K. official, preventing a plan from declining to accept such transfers. That process generally applies to defined contribution plans most U.K. participants are automatically enrolled in. Before the Pensions Act 2014, small, inactive retirement accounts were being reduced by fees and managed separately, and in an inefficient manner. Pension registry There is no pension registry in the United Kingdom providing direct access to consolidated retirement account information online, according to U.K. government officials. Individuals get information on lost accounts through a government service called the Pensions Tracing Service. Participants use the service to trace lost workplace or private retirement account based on information the participant supplies. The Pensions Tracing Service requests information from participants on their workplace or personal pension plan, such as names, addresses, dates of employment or participation in the plan, job title, and industry. Individuals use the contact information of the plan administrator to determine their eligibility for retirement benefits, and if eligible, to claim them, according to a U.K. government research report. If the trace is successful, the Pensions Tracing Service provides the current name or contact details of the plan administrator to the individual. Participants can access the Pensions Tracing Service online, or by phone or mail. The Pensions Tracing Service is a free service available to the general public in the United Kingdom provided by the U.K. Department for Work and Pensions. In addition to the contact named above, Tamara Cross (Assistant Director), Mindy Bowman and Angie Jacobs (Analysts-in-Charge), Ted Leslie, Najeema Washington, and Seyda Wentworth made key contributions to this report. James Bennett, Jennifer Gregory, Kathy Leslie, Frank Todisco, Walter Vance, Kathleen van Gelder, and Craig Winslow also provided support. Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved. GAO-14-92. Washington, D.C., November 21, 2013. 401(k) Plans: Labor and IRS Could Improve the Rollover Process for Participants. GAO-13-30. Washington, D.C.: March 7, 2013. Social Security Statements: Observations on SSA’s Plans for the Social Security Statement. GAO-11-787T. Washington, D.C., July 8, 2011. Defined Contribution Plans: Key Information on Target Date Funds as Default Investments Should Be Provided to Plan Sponsors and Participants. GAO-11-118. Washington, D.C.: January 31, 2011. Individual Retirement Accounts: Government Actions Could Encourage More Employers to Offer IRAs to Employees. GAO-08-590. Washington, D.C.: June 4, 2008.

Summary: 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. 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. 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.