When you I’m leaving workyou might forget to move your pension plan. If you’ve had multiple jobs throughout your career, there’s a chance you have one or more 401(k)s or other retirement plans you don’t know about. A new federal initiative could help you find forgotten retirement money.
Passed in December 2019, the SECURE 2.0 Act contains a list of provisions to help more people are saving for retirement. One piece of that legislation directed the Employee Benefit Security Administration, part of the Department of Labor, to create a database so we can search for lost retirement accounts. Congress gave the department until Dec. 24, 2024. to create this database.
EBSA began contacting pension plan administrations in November with a information collection notice to help populate this database.
“Our goal, which we believe plan sponsors and administrators and their service providers share, is to ensure that workers and their beneficiaries receive all the retirement benefits they have earned,” said Lisa M. Gomez, EBSA Assistant Secretary in a statement dated November 18.
This database is not yet active and experts are not sure if it will be operational before the end of the year.
“My guess is that the deadline will not be met,” said Chad Gammon, CFP and owner of Custom Fit Financial. “The amount of data to go through would be quite small to be completed in time.”
We will inform you about the next steps once the database is up and running. For now, here’s everything you need to know about the benefits of this database, how to find an old 401(k) now, and tips to help you decide what to do with an old retirement account.
How will this database help?
It can be frustrating trying to track down old retirement accounts, especially from companies that no longer exist, have been sold, or don’t have much of an online footprint. The Federal Retirement Accounts Database plans to make it easier to find old accounts that belong to you so you don’t miss out on that money.
“It’s quite common for people to forget about the retirement accounts they opened in their 20s and then remember them 40 to 50 years later,” Gammon said. “By providing an easy way to verify, this will help find many abandoned accounts.”
Read more: I Can Retire Early After Paying Off $300,000 in Debt Here’s How I Did It
How can you find an old 401(k) account now?
Once activated, this database should make it easy to track down old retirement accounts, but you have other options if you’re trying to find a plan now.
If you think you’re missing a retirement plan, you can start by calling the human resources department of your former company or the new company (if your company was bought out). Ask for the contact information—name, phone number, and email address—of the 401(k) plan administrator, and then contact the administrator to ask about your old account. You may need to be patient and persistent.
If your previous company no longer exists, this process is a bit more complicated. Start by searching your records for old 401(k) statements. If you live at the same address, you may still receive statements for active accounts – also check your email if you receive statements electronically.
If you don’t live at the same address and can’t find old statements, it becomes even more difficult, but don’t give up. There are several ways to search for abandoned 401(k) accounts online.
Gammon recommends starting with National Register of Unclaimed Pension Benefitsa free, national database maintained by the Penchecks Trust. All you need to provide is your social security number.
If that doesn’t work, try this FreeERISAdatabase of Employee Retirement Income Security Act Form 5500s, which are annual income statements that companies must file each year. You have to register to use the site, but it’s free. FreeERISA can also help you find a 401(k) that has been rolled over to an IRA. The Department of Labor also has several search tools that can help, including their own Form 5500 search and an abandoned plan databasewhich contains information about 401(k) plans that have been terminated.
Those two databases aren’t the most comprehensive and aren’t always easy to use, Gammon said.
There are also paid services that can help with this task, such as Meet the Beagle and In capital letters. Just watch out for sneaky fees.
What should you do with the money in your old 401(k)?
If you find a 401(k) you forgot about, you have a few options to consider:
Leave the money in your old account
If you don’t make plans for your retirement money, it will likely stay in your existing account. It will still accrue interest and continue to grow, but since you won’t be able to contribute to it, you’ll miss out on earning even more from compounding interest. You may also be charged monthly or annual maintenance fees to maintain your account.
It can still be a good option if you’re between jobs or not yet eligible for benefits at your new job. But be sure to keep track of important account information, including the plan provider, their contact information, and your account number. Check reports regularly for plan updates.
Transfer it to a new retirement account
In most cases, it will make sense to roll your 401(k) or IRA into your new employer’s workplace retirement plan. As long as you roll it into the same type of plan (pre-tax vs. post-tax), there will be no tax penalty for it.
If your new employer doesn’t offer a 401(k) option or you’re between jobs, you can also move your 401(k) into a traditional Individual Retirement Account (IRA). A traditional IRA has a lower contribution limit than a 401(k) — $7,000 for an IRA compared to $23,000 for a 401(k) in 2024. — but both reduce your taxable income.
You can transfer your old account online, over the phone, or via live chat, depending on the plan provider. In some cases, you may receive a check from the old provider that you will need to submit to your current pension plan within 60 days to avoid tax penalties.
Think twice before rolling your 401(k) into a Roth IRA. 401(k)s and traditional IRAs allow you to contribute pre-tax dollars while contributing after-tax dollars to a Roth IRA. If you roll over your 401(k) to a Roth IRA, you’ll be on the hook for taxes on the amount you roll over come tax season.
Redeem it
You may decide to cash in your 401(k) when you leave work, but experts urge you not to. If you do this before you turn 59 1/2, you could face a 10% tax penalty and you’ll have to pay income tax on the lump sum. If you have less than $1,000 in your retirement account, it may be automatically cashed out. You will also have less savings when you reach retirement age. If you have less than $1,000 in your retirement account, it may be automatically cashed out.
Still have questions? Talk to a financial advisor or accountant about your options and tax considerations before deciding what to do with your money.
