- The guidance consists of three parts: Best Practices for Pensions Plans, a Compliance Assistance Release, and a Field Assistance Bulletin.
- In the Best Practices of Pension Plans guidance, the DOL outlines “red flags” that may indicate that a retirement plan has a missing participant problem.
- This is the first time the DOL has published comprehensive guidance to assist plan fiduciaries with respect to missing participants.
The Bottom Line
The United States Department of Labor (DOL) has issued guidance to assist plan fiduciaries in fulfilling their ongoing obligation of locating missing or nonresponsive participants and distributing benefits to such participants or beneficiaries. This is the first time that the DOL has published comprehensive guidance to assist plan fiduciaries with respect to missing participants.
The recently issued guidance consists of three parts: Best Practices for Pensions Plans, a Compliance Assistance Release, and a Field Assistance Bulletin. In the Best Practices of Pension Plans guidance, the DOL outlines “red flags” that may indicate that a retirement plan has a missing participant problem.
These red flags include:
- The plan has more than a small number of missing or nonresponsive participants.
- The plan includes more than a small number of terminated vested participants who have reached normal retirement but have not started receiving their benefits in the plan.
- The plan has missing, inaccurate, or incomplete contact and/or Census information, such as missing addresses, emails, birth date information, spouse information, or incomplete social security numbers.
- The plan does not have sound policies relating to returned or undeliverable mail or uncashed checks.
The DOL has developed the following best practice guidance to assist plan fiduciaries in minimizing the missing participant problems in their plans. The best practices consist of the following:
- Maintaining accurate census information for the plan’s participant population. The DOL recommends that the plan contact current and retired participants on a periodic basis, include instructions within plan communications that explain how participants can update contact information, flag and follow up on undeliverable and uncashed checks, allow participants to make contact information changes through an online platform, and provide prompts that require participants to confirm contact information upon login of an online platform and regularly audit census information.
- Implementing effective communication strategies. Plans should use plain language and offer non-English language assistance when appropriate, clearly identify the purpose of plan communication materials, encourage contact updates through a plan website and toll-free phone numbers, implement steps to confirm contact information in the employee onboarding and termination process, and provide information about how the plan can help eligible employees consolidate accounts from individual retirement accounts (IRAs) and prior employer plans.
- Missing participant searches. To search for missing participants, the DOL recommends that plan fiduciaries check related plan and employment records, such as a group health plan, for participant, beneficiary, and next-of-kin information; contact designated beneficiaries and emergency contacts to request updated participant or beneficiary contact information; use free search engines, public record databases, obituaries, and social media to locate individuals; use commercial locator services or creditor reporting agencies to locate individuals; attempt contact via the United States Postal Service certified mail or other delivery service with a tracking feature to the last known mailing address; attempt to contact the individual through email, text, or social media; perform death searches if the participant is unresponsive over a period of time; contact former employees or publish a missing participant list on the company’s intranet; and register missing participants on public and private pension registries and publish the registry through internal company communications to existing employees, union members or retirees.
- Documenting procedures and actions. The DOL instructs plans to maintain written policies and procedures that result in clear and consistent practices and to document the steps taken to implement the policies and key decisions. In addition, plans should work with their third-party record keepers to identify and correct any shortfalls within the plan’s recordkeeping communication and recordkeeping practices, including its process for obtaining information held by the employer.
The DOL provided additional guidance on its Terminated Vested Participants Project plan audits. The DOL may initiate these audits if there appears to be a systemic issue with plan administration, such as if a large number of retired or terminated participants are eligible to receive a benefit under the plan, or a plan sponsor faces bankruptcy or becomes involved in a merger or acquisition. In completing these audits, the DOL seeks to identify systemic errors in the plan’s recordkeeping and administration that may result in participants failing to enter into pay status before death or the deadline to avoid taxes associated with required minimum distributions. The DOL may request plan documents, participant census information, and internal procedures and practices for locating missing participants and beneficiaries. In determining whether a problem exists, the DOL considers red flags similar to those identified in the Best Practices of Pension Plans guidance, such as the failure to use free search services, the distribution of notices that do not clearly identify the notice’s purpose, or the failure to use “plain English” within the notices or provide other reasonable language accommodations.
Finally, the DOL’s Field Assistance Bulletin authorizes plan fiduciaries of defined contribution plans to use the Pension Benefit Guaranty Corporation (PBGC) Missing Participants Program (Program) when terminating a plan. The PBGC previously limited this Program’s use to defined benefit plans, but it later expanded the program to defined contribution plans. Through the recent guidance, the DOL has indicated that it will not pursue violations against plan fiduciaries for transferring participant accounts to the Program, provided that the plan fiduciaries perform a diligent search for the missing participant beforehand and comply with all requirements of the Program.
In response to this guidance, employers and plan fiduciaries should review their internal plan policies and procedures for locating missing participants and beneficiaries and enhance or revise their policies, as necessary, to incorporate the steps identified as best practices.
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