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:
- transfer the missing participant’s funds directly to the PBGC, or
- 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||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||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||
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||
|Maintain accurate census information for the plan’s participant population||
|Implement effective communication strategies||
Document procedures and actions
 Required steps per DOL Fiduciary Advisors Bulletins (FAB) 2004-02 and 2014-01