Missing Plan Participants: Best Practices for Retirement Plan Sponsors

October 27, 2021

U.S. Department of Labor issues updated missing participant guidance

On January 12, 2021, the U.S. Department of Labor (DOL) released guidance intended to help plan sponsors and fiduciaries meet their obligations to locate missing and non-responsive retirement plan participants. Included in the recommendations are the DOL’s “red flags,” which may indicate potential procedural gaps, and best practices for pension plan administration. These guidelines include actions retirement plan sponsors and fiduciaries should take to help ensure plan participants receive the benefits they are entitled to.

Who are “missing” plan participants?

A missing participant is any terminated vested participant who can’t be located or contacted and has a plan account balance.

Why should plan sponsors be concerned about locating missing participants?

It is the plan sponsor’s fiduciary duty to manage plan assets with the best interests of all plan participants and their beneficiaries in mind—including terminated vested participants.

The DOL is engaged in an ongoing enforcement initiative known as the Terminated Vested Participants Project. Additionally, the DOL’s Employee Benefits Security Administration (EBSA), which investigates plans for fiduciary breaches, has this topic on its checklist.

“If [plan sponsors] have missing participants, there is an expectation. The failure to satisfy that expectation, in the eyes of the DOL, will be a fiduciary breach.”

– Fred Reish, 2021 NAPA 401(k) Summit

What steps can a plan sponsor take to meet its fiduciary duty regarding missing participants?

Take note of the DOL’s red flags and follow its best practices guidance, making sure to document both your process and steps taken to fulfil this responsibility. Also, be sure to utilize your plan’s recordkeeper resources for locating missing participants.

If a plan is terminating (e.g., M&A activity), plan sponsors can utilize the Pension Benefit Guaranty Corporation’s (PBGC) Defined Contribution Missing Participants Program. This is a federal program designed to identify missing participants and hold benefits for missing participants during the search process.

There are two ways to use the program:

  1. transfer the missing participant’s funds directly to the PBGC, or
  2. notify the PBGC where the missing participant’s funds are located (e.g., automatic rollover program).

DOL Red Flags

Significant number of missing participants Number of terminated participants who haven’t received benefits at retirement age Missing, inaccurate, or incomplete census data Absence of policies and procedures for handling returned/undeliverable correspondence Absence of policies and procedures for handling uncashed checks

DOL Best Practices

Best Practice  Additional Detail
Follow statutorily mandated protocols[1] Use first-class mail or ERISA compliant electronic distribution methods for delivering plan termination and benefits distribution notices to participants.
Send certified mail to last known address[1] Send correspondence and documents through USPS certified mail or a private delivery service with similar tracking features to the last known mailing address.
Check all related plan and employer records for current contact information[1]

Some examples include payroll information or group health plan information.

Note: If there are privacy concerns, the employer or plan fiduciary can forward a letter from the plan to the missing participant or beneficiary.
Conduct missing participant searches[1]
  • Check with designated plan beneficiaries and/or emergency contacts.
  • Use free online search engines.
  • Use public record databases (licenses, mortgages, real estate taxes, etc.).
  • Use a commercial locator service, credit reporting agency, or a proprietary internet search tool.
  • Use death searches (Social Security Death Index).
  • Reach out to colleagues and/or union offices.
  • Register missing participant on public and private pension registries with privacy and security protections and publicize the registry (e.g., National Registry of Unclaimed Retirement Benefits).
Note: If there are privacy concerns, ask if the beneficiary or emergency contact can forward a letter from the plan to the missing participant or beneficiary.
Maintain accurate census information for the plan’s participant population
  • Contact participants regularly to reconfirm or update contact information (including beneficiary contact information).
  • Conduct exit interviews to confirm contact information upon termination.
  • Flag undeliverable mail/email and uncashed checks.
  • Utilize online/mobile platform for participants to make updates.
  • Enact prompts upon login to company online platform.
  • Regularly audit census information.
Have heightened awareness of participant information (active and terminated) during any M&A activity.
Implement effective communication strategies
  • Use of plain language and offer non-English language assistance.
  • Clearly state the purpose of the information request (e.g., for benefit eligibility/entitlement).
  • Encourage contact through plan sponsor website and toll-free numbers.
  • Communicate resources for assistance in consolidating old employer plans and IRAs.
Include original plan or sponsor name on all correspondence during M&A activity.

Document procedures and actions

  • Put plan policies and procedures in writing.
  • Document key decisions and implementation actions.
Establish procedures with recordkeepers and TPAs regarding participant information and communications.

[1] Required steps per DOL Fiduciary Advisors Bulletins (FAB) 2004-02 and 2014-01