How To Search For Unclaimed Retirement Benefits: 401
You can take a few steps to search for your unclaimed 401 retirement benefits. The first step is to gather as much information as you can about your former employer. If your employer is still in regular operation, there is a chance that your 401 is still in the account that you had when you were with the company.
If you need to do a bit more digging, here are some steps you can take.
When No Beneficiary Is Designated
The same two scenarios can happen if the decedent failed to complete a beneficiary designation form before their death. Either the IRA or 401 will pass into the decedent’s probate estate and be available for paying the decedent’s final bills, or the IRA or 401 will pass directly to the decedent’s heirs-at-law, safe from the hands of creditors, depending on the custodian’s policy.
There’s No Surviving Designated Beneficiary
One of two things can happen if the decedent completed a beneficiary designation form prior to death, but the named beneficiary predeceases them.
- The IRA or 401 account will pass into the decedent’s probate estate and become available to pay the , or
- The IRA or 401 will pass directly to the decedent’s heirs-at-law outside probate pursuant to the terms of the IRA or 401 custodian’s payment policies. The IRA or 401 won’t be used to pay the decedent’s final bills if this happens.
Heirs-at-law are individuals who are so closely related to the decedent that they would be entitled to inherit from them in the absence of a will.
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Hire An Asset Recovery Service
If all else fails, hire an asset recovery service to run the search for you. Finding deceased people’s bank accounts is all part of a days work for investigators, who can often trace and recover bank accounts very quickly in multiple jurisdictions. Their services probably won’t come cheap, but they could be useful in large, complex cases where your relative might have left bank accounts all over the world.
Tax Implications Of Payout
Any money a beneficiary receives from the inherited 401 is taxable in the year it is paid. The 401 administrator will report the distribution to the IRS under the beneficiarys name and Social Security number, not those of the deceased participant.
Distributions from a 401 are taxed as ordinary income. The beneficiary is responsible for reporting the distribution and paying the income taxes on it. But distributions to a beneficiary from an inherited 401 account are exempt from the 10 percent early withdrawal penalty regardless of the beneficiarys age.
References
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The Surviving Designated Beneficiary
The retirement account will pass directly to its designated beneficiary outside of probate if the beneficiary survives the decedent. The account will avoid the reach of the decedent’s creditors because the probate process uses estate assets to pay off the decedent’s final debts. The IRA or 401 can’t be used to pay the decedent’s final bills if it doesn’t become part of the estate.
What Is A 401 Beneficiary
When you enroll in a 401 plan at work, youll often complete a form naming your beneficiaries. Youll be asked to name at least two people: a primary beneficiary and a contingent beneficiary:
- Primary beneficiary. Your primary 401 beneficiary is your first choice to receive your retirement assets in the event of your death.
- Contingent beneficiary. Your contingent, or secondary, beneficiary is the person who will receive benefits if your primary beneficiary isnt alive when you die, or declines to accept the benefits.
You may name more than one person in both the primary and contingent beneficiary categories. If you do, though, youll need to specify the percentage each primary beneficiary will receive. The shares dont have to be equal, but the total must equal 100%. For example, you could name a sibling as a primary beneficiary receiving 80% of the account balance, and two charities receiving 10% each.
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Federal Deposit Insurance Corporation
The FDIC is designed to protect people’s money held in banks through FDIC insurance. Bank account holders have federal protection for assets up to $250,000 in any given FDIC-insured institution.
The FDIC not only provides this insurance for account holders against potential bank failure, it also maintains records of merged or failed institutions, and the owners of those accounts. Going to the FDIC website, use the “bank find” tool to search institutions. If funds were unclaimed for an extended period of time, they may be held in the state controller’s office. The FDIC offers links to free search tools administered by the National Association of Unclaimed Property Administrators.
Is There Lost Loot Out There With Your Name On It We’ll Tell You How To Search
Do you look for your name in newspaper ads that list owners of unclaimed property? That’s a start, but you’ve also got to broaden your search if you expect to find forgotten funds. Many types of lost assets, including pensions and U.S. Savings Bonds, aren’t safeguarded by the state agencies that place those newspaper ads.
It’s easier than ever to find forgotten property thanks to the increasing number of databases. In most cases, it makes sense to do the sleuthing yourself rather than pay a finder firm to do it for you. If you locate funds that are yours, the fiduciary that holds them will provide specific instructions on how to claim them. You’ll need proof of your identity. If the property belonged to a deceased relative or friend, you’ll also have to prove that you are the executor of the estate or the rightful heir.
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Contact The Deceaseds Financial Advisors
Anyone who advised the deceased on financial matters or helped themmanage their estate â such as an accountant, attorney, financial planner, banker, or business partners â might be able to track down their insurance policy, or at least tell you which company they purchased the policy from.
Similarly, if the deceased person purchasedhome insurance orauto insurance through an insurance agent, itâs worth contacting them.
What You Can Do Next
In order to keep track of your retirement accounts, you first must know where they all are. Once you gather all your old accounts in one place and make sure they are properly balanced, its about sticking to the same investment principles ensuring your money is in diversified, low-cost funds that you would follow for your current company retirement plan.
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How To Find Lost 401 Cash
In the hurried days of a big move to a new job, theres one valuable item workers are neglecting to pack: the money their former employer invested for them in a 401.
Theres a lot of lost retirement savings without its rightful owners. Exactly how much is unknown there is no one comprehensive national database on 401 or other lost retirement accounts. But PenChecks Trust, a California-based firm that helps companies locate former employee-owed retirement benefits, paid out $35 million to more than 15,000 missing participants in 2017 alone, says company vice president Spiro Preovolos. And Preovolos estimates that nationally the amount of lost retirement funds is well into the billions of dollars.
If you think some of that lost cash may be yours, heres what to do:
Your Kids Are Underage
If you want to name a minor child as a beneficiary, you should consider consulting with an estate planning attorney first. Most 401 plans will not transfer money directly to a minor. Instead, a court will have to appoint a trustee or guardian to receive the funds, which can take some time.
There are a few ways to avoid this, and your options may depend on the laws in your state. Some states allow parents to name a minor as a beneficiary and a custodian who will manage the assets in the childs best interest until they reach a certain age usually 18 to 25, depending on the state.
Another option is to create a trust. When you create a trust, you also name a trustee who will manage trust assets on behalf of your child either until they reach a certain age or for their lifetime. Then you would list your childs trust as your beneficiary. In either case, its a good idea to consult with an attorney first to make sure youre not unintentionally jeopardizing your childs inheritance.
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Opening An Inherited Ira
You can convert the existing IRA or 401 account into what’s called an “inherited IRA.” This may be a good idea if you’re not yet 59 ½ and want access to the funds without an early withdrawal penalty.
You might need to take required minimum distributions each year. The exact amount of the RMD will be based on your statistical life expectancy. If your spouse was older than 72 at death, you must begin taking RMDs by the end of the calendar year following your spouse’s death. If your spouse was younger than 72, you may be able to wait until your spouse would have turned 72 and been required to make withdrawals.
If you want to open an inherited IRA, it’s important that you NOT take out money from the account. The transfer must be made directly from the old account to the new one, in what is called a “trustee to trustee” transfer. Otherwise you could owe income tax on the money.
Lump Sum Payout Option
When a 401 plan participant dies, many plans for administrative convenience specify that beneficiaries receive all the money in the account in a lump sum. IRS rules require that the lump sum must be paid no later than Dec. 31 of the year following the participants death. If a participant died in 2018, for example, the money in the 401 must be paid to the beneficiary by the end of 2019.
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Changes Made Under The Secure Act
Recent changes to estate laws have changed quite what is required of 401 beneficiaries.
The Setting Every Community Up for Retirement Enhancement Act was signed into law in December 2019. The bill includes provisions that seek to increase access to tax-advantaged retirement accounts and preventing Americans from outliving their retirement accounts.
Contact Your Former Employers
Go back to your former employers with your Social Security number and the time you were employed. Better still, locate an old statement from your 401 plan with them. With that information, the human resources department can help reunite you with your retirement savings.
It seems an obvious place to start, but many people dont get that far. A majority of the people are on the younger side. They arent thinking about retirement, or may not even know or remember they had a 401 with the company, Preovolos says.
And the number of people who lose track of their 401 is going to increase significantly in the next 10 or 20 years, says Terry Dunne, a managing director at Millennium Trust, an Illinois-based financial services company that provides custody services to individual accounts. Thats thanks to the Pension Protection Act of 2006, which encourages companies to automatically enroll workers in 401s or other employer-sponsored retirement plans, Dunne says.
One more potential factor: The rate of early career job-hopping is steadily increasing. A 2016 LinkedIn analysis found members who graduated between 2006 and 2010 averaged 2.9 jobs their first five years employed, compared to 1.6 jobs of workers who graduated between 1986 and 1990.
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Tracking Down Your Plan
If you think youve lost track of a savings plan, search your files for old retirement account statements. These should provide some key data to help your search, such as your account number and contact information for the plan administrator. If you dont have any statements, contact your former employers human resources department.
If your employer filed for bankruptcy, your 401 balance is protected from creditors and is likely still held at the investment company that administered your plan. In the case of a pension, it was either taken over by an insurance company or the federal Pension Benefit Guaranty Corp., which protects traditional pensions. You can track down your pension at pbgc.gov/search-all.
Its also possible that your employer turned over your 401 balance to your states unclaimed property fund. Your states treasury department should offer an online service that lets you search for your money. You can also check the National Registry of Unclaimed Retirement Benefits.
Requesting A Social Security Record
Through the Freedom of Information Act, you can apply to get a deceased relative’s Social Security record from the SSA. Often used in genealogical research, this record includes the person’s Social Security application in addition to the SSN.
You have two choices in how to receive this information. For $27, you can get a computer extract of the record, which includes the Social Security number. For $21, you can get a photocopy of the actual application which includes the SSN and much more information, including:
- applicant’s full name, including maiden name
- address at time of application
- employer and employer’s address
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Department Of Labor Guidelines
The Department of Labor in Field Assistance Bulletin No. 2014-01 lists the following search methods as the minimum steps the fiduciary of a terminated defined contribution plan must take to locate a participant:
- Send a notice using certified mail
- Check the records of the employer or any related plans of the employer
- Send an inquiry to the designated beneficiary of the missing participant
- Use free electronic search tools
FAB 2014-01 also describes additional appropriate search methods and the distribution options for a terminating plan if a participant cannot be located.
Next Steps For Your Money
If your old 401 plan is still with a former employer, one option is to leave the money there. But you may not pay as much attention to the account, which could lead to a portfolio thats not appropriate for your age and risk tolerance.
If youre still working and have a 401 at your new job, another option is to roll over the funds into your existing plan, assuming your employer allows it. Another option is to roll the money into an IRA. Having your savings in one place will make it easier to manage your investments.
If youve lost track of a pension, request a pension benefits statement from the plan administrator. Give the administrator your address and phone number so it can reach you to begin payments. You may need to prove your work history and eligibility for the pension you can do so by providing the plan administrator with old W-2 forms or an earnings statement from Social Security, which you can get by filing Form SSA-7050. You can get this form at www.socialsecurity.gov/online/ssa-7050.pdf or by calling Social Security at 800-772-1213.
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How To Provide Your Surviving Spouse An Income For Life
Referring back to the Rollover option, you can roll over your 401 into a deferred annuity with an income rider now while youre alive. Utilizing this method will allow both spouses to generate an income for the rest of their lives, even if the 401 ran out of money, solidifying any doubt in your financial situation now or in the future.
Search For Money From A Former Employer
You have at least a couple ways to track down money from a former employer:
- If you think youre owed back wages, you can turn to the Department of Labors database and see if its holding your cash. The department holds unpaid wages for up to three years.
- If youre searching for unclaimed pensions because a company went out of business or ended a defined benefit plan, you can turn to the Pension Benefit Guaranty Corp.s website. More than 80,000 people have earned a pension but havent claimed it, the organization says.
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Free Ways To Find Unclaimed Money
If you think you have unclaimed money or that a relative does, one of the best steps is running through old financial statements to see if you can find evidence of it. That could be useful if the relative has passed on and you dont know where to begin. If you discover an account such as a 401 or IRA, you can contact the plans administrator and go from there.
But many times, the process is more complicated. Here are the places to go next.
Roll The Account Over Into His Or Her Own Retirement Account
Some retirement plans require that a deceased employees account be distributed in a lump sum. In order to avert an immediate tax obligation, a surviving spouse could roll over the account into his or her own IRA or other retirement plan. Required minimum distributions would begin when the surviving spouse turns 70 ½.
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