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GAO Offers Ideas on Lost Participants, Foreign Plans

A recent study by the Government Accountability Office (GAO) examines the challenges facing plan administrators when dealing with lost plan participants and reporting foreign retirement savings, and reviews steps federal agencies might take to help.

Missing Participants

The scale of the problems created by lost participants is not insignificant, the GAO found. It says that during the period 2004-2013, more than 25 million employer plan participants separated from an employer and left at least one retirement account behind.

One of the reasons those ex-employees lose track of their retirement accounts when they change jobs, the GAO says, is that they do not receive communications from plan sponsors when they do so. But the latter may not be entirely to blame, the GAO found in an earlier study, in which it said: “when participants leave savings in a plan after separating from a job, the onus is on them to update former employers with their new address and to respond to their former employer's communications.”

However it happens, when an ex-employee is lost, says the GAO, there are no standard practices for the frequency or method of by which employers are to conduct searches to find them. Nor is there guidance from the Department of Labor (DOL) on keeping track of separated participants, according to the report, despite the fact that the DOL has issued guidance on searching for missing participants if a plan is terminating.

Ultimately, the result of leaving an account behind and not receiving information about it, the GAO says, is that it leaves such plan participants “vulnerable to unforeseen tax consequences that can result in a loss of retirement savings.” It notes that “without guidance on how to search for separated participants who leave behind retirement accounts, sponsors may choose to do little more than remove unclaimed accounts from the plan when possible, and workers may never recover these savings.”

Foreign Plans

Stakeholders told the GAO that complex federal requirements governing the taxation of foreign retirement accounts and a lack of clear guidance on how to report these savings pose challenges for participants in such plans, whom the report says run the risk of filing incorrect returns. Not only that, says the report, participants in foreign retirement plans also face problems transferring retirement savings if they change jobs.


The GAO has suggestions for steps that Congress, the DOL, the IRS and the Social Security Administration (SSA) can take to address these circumstances.

Congress. The GAO suggests that Congress consider legislation modifying the Internal Revenue Code to allow routine account transfers within the same foreign workplace retirement plan or between two foreign workplace retirement plans in the same country to be free from U.S. tax in countries covered by an existing income tax treaty that provides for favorable U.S. tax treatment of foreign workplace retirement plan contributions.

DOL. The GAO suggests that the Secretary of Labor issue guidance on the obligations under ERISA of plan sponsors of ongoing plans to prevent, search for and pay costs associated with locating missing participants.

IRS. The GAO suggests that the IRS take the following steps.

  • Review taxation issues relating to distributions involving incorrect participant addresses and uncashed benefit checks and clarify the Internal Revenue Code’s requirements in these circumstances.

  • Consider revising the letter forwarding program in a cost-effective manner to again provide information on behalf of plan sponsors on unclaimed retirement accounts to participants.

  • Clarify how U.S. individuals are to report their foreign retirement accounts;

  • Systematically analyze data reported through Form 8938 filings on foreign retirement accounts owned by U.S. individuals to develop an evidence-based understanding of how these accounts change and how serious the risk of tax evasion is concerning these accounts.

  • Consider revising Form 8938 to more clearly distinguish between retirement accounts and other types of accounts or assets being reported by taxpayers under current reporting requirements.

  • Improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future.

SSA. The Social Security Administration should take steps to improve the likelihood that the Notice of Potential Private Pension Benefit Information corresponds to actual retirement benefits in the future, the report recommends.

The GAO report, “Workplace Retirement Accounts: Better Guidance and Information Could Help Plan Participants at Home and Abroad Manage Their Retirement Savings,” is online here