Inactive 401(k) accounts need greater protections

Millions of Americans—almost 40% of workers—leave their jobs each year, and many fail to specify what should be done with their 401(k) savings. If the balance is small, employers can transfer it out of the plan. Specifically, under the Internal Revenue Code, former employers can transfer balances of less than $5,000 into an IRA account. In addition, as employees move in and out of jobs, they face the task of managing multiple accounts.
A recent report by the Government Accountability Office—401(k) Plans: Greater Protections Needed for Forced Transfers and Inactive Accounts—examined: 1) what happens to forced transfers over time; 2) the challenges of managing multiple accounts and what could be done to help; and 3) how other countries deal with the challenges of inactive accounts.
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