When employees leave a job, there is one important thing that they usually forget to take with them – their retirement account money, according to Workforce Management. It’s something human resource departments need to keep in mind for departing workers, reminding them to take their retirement cash. This will save the company the time and effort of having to manage the money even after the employee is gone.
Among accounts managed by Charles Schwab, more than 40 percent of workers who left their jobs in early 2008 still had not moved their retirement money later in the year. And this puts a burden on the companies they’ve left behind.
Often the idle accounts contain less than $5,000. And many smaller accounts account for higher administrative fees. But finding former employees is not always easy, and after finding them, getting them to do something with their money can be even harder.
And, with the weak economy of the past few years where many workers lost their jobs, even more money was left behind. According to some officials, more than $14 million was left behind in 2009, and that number could increase to $20 million by 2020. It’s becoming a big problem for businesses.
Financial advisers say that it is important for companies to have a procedure for finding and handling former employees who have abandoned their retirement accounts. These issues, if handled promptly, are not that hard to take care of, but if they are allowed to linger, that’s when they become a problem. Once a procedure has been established for dealing with the problem, it can work pretty much automatically, according to financial experts.
Most of the time, the retirement plan keeps track of the accounts and sends a report of the names of former employees and what their balances are. The law allows companies to automatically rollover accounts with less than $5,000 into an Individual Retirement Account. It can stay there until the person decides to do something with the money.
If there is more than $5,000 in the account, it has to stay with the retirement plan and must be managed by the sponsor of the plan. The former employee would still get the same information about the plan as people who are still working for the company.
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