As a baby boomer, I joined the labor force when many jobs still came with an old-style pension, the kind that pays a fixed monthly sum in retirement. Although pension plans have been largely phased out in favor of 401(k) and individual retirement accounts, those of us who paid into them are entitled to the benefits we accrued.
Getting our hands on the money may not be easy, as I recently learned when I decided to take inventory of my retirement assets. Job-hopping workers, corporate upheaval, and spotty record keeping have left billions of dollars owed to Americans in limbo. “It’s a vast problem that has a huge impact on retirement security,” says Jeanne Medeiros, director of the Pension Action Center, a research group at the University of Massachusetts Boston. She estimates unclaimed pension benefits could total as much as $8 billion annually.
When I left a job at National Journal magazine in Washington in 1995, I was offered a choice between staying in the company pension plan or taking a $19,100 lump-sum payment. I opted for the pension, carefully filing away the paperwork I got from HR, which estimated I’d get $436 a month starting at age 65. That doesn’t sound like much, but it would total more than $100,000 if I lived 20 years after retirement.
National Journal had been owned by the Times Mirror media group when I worked there, but was sold in 1997. I figured the new owner’s HR department would still have the pension records. It didn’t and had no idea who did. Times Mirror was eventually acquired by the Tribune Co., which split into two companies in 2014. News reports at the time said Tribune had more than $90 million in unfunded pension liabilities. Oh dear.
I tried the Pension Benefit Guaranty Corp., a federal agency that takes over pension plans if they go bankrupt. It’s also a repository for unclaimed benefits owed to people whose former employers have terminated their plans. The PBGC has an online database of some 35,200 people who are collectively owed $351.5 million. I wasn’t in the database—which was frustrating, but also good news, since it meant my pension plan hadn’t gone bust or shut down.
I then turned to the Pension Rights Center, a nonprofit that has counseling centers in 30 states to help people with retirement-benefit problems. Bad luck: Neither the District of Columbia, where I had worked, nor Virginia, where I lived at the time, are among the areas it serves. Next stop was the Department of Labor’s Employment Benefits Security Administration, which helps people locate pensions and 401(k) accounts. I filled out a request form on its website. A few weeks later, a representative left a message saying she was still searching.
In the meantime, though, I’d had a breakthrough: A former colleague remembered that another co-worker had opted to remain in the old pension plan back in 1997. I located him, and he told me he was now receiving monthly retirement benefits via fund management giant Vanguard. I called Vanguard, provided my Social Security number, and—bingo!
Later, I learned that my pension had been folded into a Times Mirror plan after the 1997 sale. Tribune, after acquiring Times Mirror, had kept that plan separate from its troubled pension holdings (what luck!) and hired Vanguard to administer it. A letter apprising me of all these changes was mailed to an address where I hadn’t lived for 17 years. Such situations are “not uncommon,” Emily Farrell, a Vanguard spokeswoman, told me, noting that plan participants “move, marry, change names, etc., and often don’t notify the plan sponsor.”
Tracking down an errant 401(k) can be even more challenging, according to John Turner, director of the Pension Policy Center, an advocacy group in Washington. The Labor Department says employers abandon some 1,650 401(k) plans every year. Over the past decade, that’s left in limbo more than $8 billion owed to people who left their accounts behind when they changed jobs. Even when plans remain active, people sometimes forget about their accounts or die without leaving records for heirs. The Labor Department can sometimes help locate missing 401(k) savings, but not always. Unclaimed 401(k) accounts often sit in financial institutions for years and eventually are turned over to state abandoned-property agencies, Turner says. “It’s kind of a black hole.”
Turner’s group has urged the government to set up a searchable registry of unclaimed pensions and retirement accounts nationwide, as Britain and Australia have done.
One easy way to keep tabs on a pension or 401(k) when you change jobs is to roll the money over into an IRA or your current employer’s 401(k). There’s a downside, though. A study last year by the Center for Retirement Research at Boston College found that annual returns on IRAs averaged only 2.2 percent from 1999 to 2012, compared with 3.1 percent for 401(k)s and 4.7 percent for traditional pension plans. Higher management fees account for at least some of the difference, the study found.
The bottom line: Unclaimed U.S. pension benefits may total as much as $8 billion annually. Abandoned 401(k)s leave billions more in limbo.