The red tape and hassles involved in rolling an account over to a new employer is an old problem. The bill says up to $105 billion in retirement savings are lost annually because employees cash out their savings after a job change.
According to the Employee Benefit Research Institute, nearly 15 million 401K plan participants change jobs every year
“Start with this, people hate the paperwork they have to do to save for retirement when they switch jobs,” Brown said in an interview Wednesday.
This bill would make continuance of savings between employers automatic, he said. “When workers change jobs, they can take their retirement savings with them. They wouldn’t have to fill out these forms and have these delays because the present law just doesn’t account for this in the right way,” Brown said.
Employers would have to be involved to facilitate the automatic rollover of plans, he said.
Brown expects the bill to roll into the Senate version of the bipartisan “Securing a Strong Retirement Act of 2022,” which passed the House of Representatives in March. The bill has bipartisan support and no opposition, he said.
The senator also said Wednesday that too many workers have no pensions or 401K savings accounts.
“This legislation recognizes that cash-out leakage — driven by the frictions prevalent in moving money between plans in our country’s retirement system — is adversely affecting Americans’ retirement outcomes in a very big way,” Spencer Williams, president and chief executive of Retirement Clearinghouse, said in a release earlier this month.
“For too many Americans, the security of retirement savings after a lifetime of hard work is too far out of reach,” Scott said in a statement from Brown’s office “Making it easier for workers to build savings will alleviate stress for families and ensure every person has the opportunity to retire with dignity, regardless of their income or economic status.”
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