If You Change Jobs, Don't Forget Your Retirement Accounts!

February, 03 2025 by Carolyn Richardson, EA, MBA

Back in your parents' days, people used to work for one employer and stayed there for most of their career. One of the primary reasons many people did that is because the employer offered a pension when they retired (this is also sometimes referred to as a defined benefit plan). Frequently, these pensions required you to work a minimum number of years, such as 20 years, in order to earn a benefit under the pension plan. Now, of course, most employers have given up or discontinued offering traditional pensions, which are costly to the employer, in favor of 401(k)s or 403(b) plans where the employee contributes most of the funds toward their own retirement, and the employer may or may not contribute to the plan on behalf of employees.

As a result, most people no longer work for the same employer for their entire career. Changing jobs frequently is now the norm, especially for the younger generation. And changing jobs to earn more money has always been something employees have done. If you have changed jobs multiple times during your working career and are now looking at retiring, you may be overlooking accounts you had with previous employers. With so many jobs under your belt, it may be difficult to keep track of which employers you had a retirement plan with that you contributed to. It is estimated that roughly 20% of all 401(k) assets in the U.S. were in forgotten accounts. If you have changed jobs multiple times, you may have multiple 401K's out there.

If you're younger and still working, this may get even worse as you continue in your career. Starting in 2025, the SECURE 2.0 Act requires mandatory contributions to 401(k) plans if an employer establishes the plan after December 29, 2022. Employees must opt out of participating in the 401(k) plan; otherwise, the employer is required to contribute between 3% and 10% of the eligible employee's pay to the 401(k). If you're one of those people who doesn’t ever look at your pay statements, you may not even be aware that you are contributing to the 401(k).
 

What happens when you change jobs and leave those retirement accounts behind?

If you were contributing to a 401(k) or 403(b) plan, that money will stay with the employer-sponsored plan until such time that you claim the money or the company decides to close your account. That can be fine from a growth standpoint, as the account will continue to earn compound interest and increase in value, depending on what types of investments the account is invested in. However, in some cases, this money may be rolled over to an IRA account that you are unaware of or to the state unclaimed property office.
 

How do you find out if you have accounts at former employers that you may have forgotten about?

If you know you had an account with a former employer, the best thing to do in order to claim this money is to contact the plan administrator for the plan. If you still have statements from this account, the plan administrator will be listed on the statements. However, I have found that with most plans issuing electronic statements, most taxpayers do not maintain copies of these documents. The plan administrator is frequently someone in the company's human resources department, but it may also be another company, such as Fidelity, Schwab, or Vanguard, who administers many plans for various employers. If your former employer is still in business, this is relatively straightforward, and once you have information on your account, you can transfer the funds to a new account – such as an IRA – via a rollover. You can also cash out or liquidate the account, but that might trigger an early withdrawal penalty and income taxes, depending on your age. Keep in mind that if you cash out the account when you're under 59 ½, you will be subject to the early withdrawal penalty, and a cash-out of any pre-tax retirement account will result in income taxes due on the distribution.
 

What if your former employer is no longer in business?

If the employer is no longer in business, they may have terminated the retirement plan, but in many cases, the plan remains with the administrator if it was administered by another company. However, it may depend on the type of plan that the employer maintains. If the employer offered a traditional pension account, and that pension account was terminated, then the pension account usually reverts over to the Pension Benefit Guarantee Corporation (PBGC), which is a government agency that administers pension plans for defunct employers or for terminated pension plans. The PBGC maintains a database where you can search by your last name and Social Security number if you believe that you are entitled to retirement benefits under a defined benefit plan, AKA a traditional pension. If the plan ended in a standard termination or the plan ended and transferred benefits to the PBGC, PBGC is now the trustee of the defined benefit plan. You can find the database at PBGC.gov or call them at 800-400-7242.

If your 401(k) plan was abandoned or terminated by a former employer, you can also check with the U.S. Department of Labor at Askebsa.dol.gov (or 866-444-3272). If you can't find your former employer and have a 401(k), there are other options available for tracking down this information. Most retirement plans require the employer to file Form 5500 to report the plan assets and the plan administrator to the IRS. Form 5500 can be found through the DOL's EFAST system (efast.dol.gov/welcome.html). However, this can only be searched if your employment was after 2010.
 

If your account value is under $5,000, employers can transfer this money to an IRA without additional consent from you.

There is no paperwork on the forced rollover. If you believe that your plan was transferred to an IRA by your employer, you should first check with the former plan administrator because the employer will usually transfer the 401(k) to an IRA with the same trustee, especially if that trustee was a bank or other trustee company like the ones mentioned before. You can also do an internet search for "Abandoned Plan Search," which is a database of companies that accept transfers of small balances from 401(k) plans. You can then contact those companies to see if they have an account under your Social Security number.

If your former employer terminated the 401(k) plan, they must transfer all the plan assets to the plan participants. If they can't locate the plan participant, they can send the money to an IRA or the state's unclaimed property fund. This action generally will happen if they are unable to contact you – for example, if you have moved from where you lived when you were working for that employer and did not inform the employer of your move. You can locate your state's unclaimed property fund by searching for your state and "unclaimed property" by doing an internet search. You generally just need to enter your Social Security number and other identifying information in order to search the database. If the state is holding your money in unclaimed property, the website will give you information on what steps you need to take in order to claim those funds. If your 401(k) plan terminated in 2023 or later, the PBGC may also have accepted a transfer of the account if your employer considers you missing.
 

It's best to be proactive when it comes to your retirement accounts.

Forgetting about accounts when you change jobs not only deprives you of potential growth in the account but can also lead to unpleasant surprises. Accounts that are transferred to an unclaimed property fund no longer grow or receive a minimal amount of interest. I remember helping a taxpayer who only learned he had a pension account with an employer when he received a notice from the IRS regarding a distribution of the account that he had not reported on his return. He had not worked for that employer in over 30 years, and the employer had been sending the pension checks to his old address, where someone who lived there was cashing them! This had apparently been going on for a number of years before the IRS questioned the taxpayer about the missing income. Another client also received a notice from the IRS when the employer sent the money in the 401(k) plan to the state unclaimed property fund and reported it on a Form 1099-R to the IRS. The taxpayer hadn't received the money, but the IRS determined it was taxable.