According to an updated version of its 2021 whitepaper, Capitalize has found that forgotten accounts have grown by 20% in the last two years. As of May 2023, according to their study, there are an estimated 29.2 million forgotten or left-behind 401(k) accounts in the U.S., representing $1.65 trillion in assets.
The analysis showed that 3.8 million 401(k) accounts were left behind in 2021, with another 4.4 million forgotten in 2022. The average account balance of a forgotten 401(k) account increased to $56,616 from $55,400. In aggregate, the assets left behind by job changers now represent close to 25% of the total assets in 401(k) plans.
There is a cost to forgotten accounts. It increases a plan sponsor’s liability because many forgotten accounts belong to missing participants who no longer have access to their 401(k) plan account, which means no relief for the plan sponsor from ERISA 404(c) liability. It certainly leads to bad allocations, as well as increased fees that a missing participant could have saved with their own IRA program.