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Can Automation Help Solve the Missing Participant Problem?

As workers become more highly mobile, frequently changings jobs and homes, the task of finding missing plan participants can be a time-consuming and difficult process for plan sponsors, particularly in light of the Department of Labor sharpening its focus on efforts taken by sponsors to find missing participants.

To get a better handle on the problem, Boston Research Technologies (BRT) collaborated with the Retirement Clearinghouse on a first-of-its-kind survey of 1,000 participants who had been terminated from at least one employer-sponsored 401(k) plan to inquire about the status of the accounts they left behind at their former employers.

The resulting report, “The Mobile Workforce’s Missing Participant Problem” (free, but registration is required) reveals, among other things, that a participant move created a stale (or missing) address record for one out of every five accounts simply because the participant did not inform their former employer when they relocated. In addition, 11% of all terminated account records have an outdated address, and most of these missing participant accounts — especially those with balances below $10,000 — belong to Millennials.

“High workforce mobility and the fact that participants frequently forget to update their contact details with previous employers and plan recordkeepers, are twin drivers of missing participants in employer-sponsored plans,” explains Warren Cormier, BRT’s Founder and CEO.

“Demographic trends revealed in the survey suggest the problem could get worse before it gets better.”

Remarkably, the study also found that one-third of the participants — including half of the Millennials surveyed — learned of a retirement savings account with a previous employer’s plan that they did not know they had.

When asked how they receive information about their previous employer account, participant responses included:

  • 51% from the U.S. Postal Service

  • 26% from a personal email

  • 15% from a work email

  • 7% do not receive information

Echoing growing calls for improved automation and electronic delivery, a significant majority of participant respondents (60%) said they would prefer an automated process to update their addresses or consolidate their prior-employer plan accounts in their current employers’ plans. In addition, 23% of respondents said they would utilize a lost-and-found database.

Interestingly, the study also revealed that a strong majority of stale records can be matched with active records. The findings show that 67% of stale address records for missing participants can be matched with an active participant record in the systems of the recordkeepers that sponsors already employ to administer their plans. What’s more, the study emphasizes that active participant records are very reliable (at 92.6%) and further suggests that they are an untapped source of verified, accurate addresses that sponsors can leverage to help mitigate the problem.

The strongest predictor of the account not being lost was the respondent’s knowledge of how to contact the company holding the account. According to the findings, accounts held by respondents who reported knowing how to do this were nearly seven times less likely to be lost.