Jeffrey Bedell, J.D.
Bedell Financial

Initial interviews with prospective clients often consist of closed ended questions. “Do you own a home?” “Do you own a business?” “Are you married?” The fact gathering necessary in an initial interview does not always allow the sort of leisurely chat friends would have over coffee. Our clients are busy people and so are we. While crucial to gather the basics in the initial meeting, if no open ended questions are asked then assets important to the client’s situation can be overlooked.

For example, approximately 4.2 trillion dollars is held today in 401(k) and other defined contribution plans. For public sector employees, a defined contribution plan may include a 403(b) or 457(b) plan. The amount of assets held in defined contribution plans is projected to grow in the future given that in the private sector and possibly even the public sector, a regular pension or defined benefit is going the way of the Dodo bird. While going forward employers may still provide matching or non-matching contributions to an employee’s account, the trend is clear that fewer em­ployees and retirees in the future will be able to depend on a monthly pension check.

A 2009 study by human resources consulting firm Hewitt Associates (now Aon Hewitt) concluded that 29 percent of former workers leave their 401(k) with a previous employ­er.¹ This amounts to a huge sum of assets held by Ameri­can workers that can be overlooked if a client is asked only “do you currently have a retirement account?” The same study also stated that two-thirds of employers report that the company 401(k) plan is the primary retirement savings vehicle for employees. Clearly then gathering information regarding an old 401(k) plan is an important step in assess­ing a client’s situation.

Determining the existence of an old 401(k) becomes even more important in the context of trust administration and probate. If you are speaking to a surviving spouse or beneficiary of someone who was not the plan participant, knowledge of the 401(k) can be even more attenuated. Going through a deceased person’s mail is often a good way of discovering what assets they may have, but a per­son may not be receiving paper statements from the plan administrator or they may have moved and not changed an address with the plan administrator. Also, unlike life insur­ance where current premiums may be due and require ac­tion on someone’s part, a plan participant may not prioritize and save old statements.

Asking open ended questions about a person’s work history is a good method to discover unclaimed 401(k) assets. If the client in your office is unsure, the best way to determine if an old 401(k) exists is to contact the deceased’s employer and find out using the deceased’s date of birth, social secu­rity number, and dates of employment. If the old employer no longer exists because of dissolution or merger, there are other ways to find information. Most plans are required to file a Form 5500 to satisfy annual reporting requirements of ERISA. Copies of the Form 5500 may be found at freeerisa.com. You can also search the National Registry of Unclaimed Retirement Benefits at unclaimedretirementben­efits.com. Another possibility is any unclaimed property database maintained by your state.

Finally, inquiring about old 401(k) plans helps with other estate planning essentials. The importance of having proper primary and contingent beneficiary designations on retirement accounts and life insurance has been explored in other articles and will not be dwelled upon here. Suf­fice it to say, up to date beneficiary designations are critical and clients are advised to review them at a minimum upon the major life events of birth, death, marriage, and divorce. Helping discover whether any 401(k) assets are unclaimed facilities a discussion about current assets and whether those beneficiary designations are also up to date.

About the Author:

Jeffrey Bedell is the principal of Bedell Law Office in Sacramento. His practice focuses on estate planning, trust administration, and probate. He can be reached at jeff@sacramento-estate-planning.com.

¹ Hewitt Associates, 2009 Trends & Experience in 401(k) Plans, accessed here on March 19, 2012.