DOL Offers Guidance for Locating Missing Participants

The U.S. Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) has issued guidance to help retirement plan fiduciaries meet their obligations under Title I of the Employee Retirement Income Security Act (ERISA) to locate and distribute retirement benefits to missing or nonresponsive participants.

The guidance comes in three forms: A page titled “Missing Participants – Best Practices for Pension Plans,” Compliance Assistance Release 2021-01 and Field Assistance Bulletin 2021-01.

“Best Practices for Pension Plans” describes a range of best practices fiduciaries of retirement plans, including defined contribution (DC) plans, should consider as steps their plan could take to help reduce missing participant issues and ensure that plan participants receive promised benefits when they reach retirement age. The EBSA suggests putting processes in place to regularly update participant census data and beneficiary information.

In addition, the guidance lists best practices to find missing participants such as:

• Checking related plan and employer records for participant, beneficiary and next of kin/emergency contact information. While the plan might not possess current contact information, it is possible that the employer’s payroll records or the records maintained by another of the employer’s plans, such as a group health plan, could have more up-to-date information. If there are privacy concerns, the person engaged in the search can request that the employer or other plan fiduciary forward a letter from the plan to the missing participant or beneficiary;
• Checking with designated plan beneficiaries (e.g., spouse, children) and the employee’s emergency contacts (in the employer’s records) for updated contact information. If there are privacy concerns, ask the designated beneficiary or emergency contact to forward a letter to the missing participant or beneficiary;
• Using free online search engines, public record databases (such as those for licenses, mortgages and real estate taxes), obituaries and social media to locate individuals;
• Using a commercial locator service, a credit-reporting agency or a proprietary internet search tool to locate individuals;
• Attempting contact via United States Postal Service (USPS) certified mail, or private delivery service with similar tracking features if less expensive than USPS certified mail, to the last known mailing address;
• Attempting contact via other available means such as email addresses, telephone and text numbers, and social media;
• If participants are nonresponsive over a period of time, using death searches (e.g., Social Security Death Index) as a check and, to the extent such search confirms a participant’s death, redirecting communications to beneficiaries;
• Reaching out to the colleagues of missing participants by, for example, contacting employees who worked in the same office (e.g., a small employer with one or two locations) or by publishing a list of “missing” participants on the company’s intranet, in email notices to existing employees or in communications with other retirees who are already receiving benefits. Similarly, for unionized employees, some have reached out to the union’s local offices and through union member communications to find missing retirees;
• Registering missing participants on public and private pension registries with privacy and cybersecurity protections (e.g., National Registry of Unclaimed Retirement Benefits), and publicizing the registry through emails, newsletters and other communications to existing employees, union members and retirees; and
• Searching regularly using some or all of the above steps.

The guidance also offers best practices for plan sponsors to document their efforts.

Compliance Assistance Release 2021-01 outlines the general investigative approach that will guide the EBSA’s regional offices under the Terminated Vested Participants Project for defined benefit (DB) plans and facilitate voluntary compliance efforts by plan fiduciaries. The guidance reveals the information EBSA staff request from plan sponsors and the errors they look for.

Field Assistance Bulletin 2021-01 authorizes, as a matter of enforcement policy, plan fiduciaries of terminating DC plans to use the Pension Benefit Guaranty Corporation (PBGC) missing participant program for missing or nonresponsive participants’ account balances. The guidance describes which participant accounts may be transferred to PBGC and the rules for participant notices.

The EBSA notes in the Field Assistance Bulletin that PBGC cites multiple benefits of the program, including:

• benefits of any size can be transferred to PBGC;
• periodic active searches by PBGC increase the likelihood of connecting missing participants with their benefits;
• benefits are not diminished by ongoing maintenance fees or distribution charges;
• transferred amounts grow with interest (at the applicable federal mid-term rate); and
• lifetime income options are available for balance transfers over $5,000.

“The guidance issued today reflects our ongoing commitment to help plan fiduciaries ensure that their plan participants and beneficiaries receive the retirement benefits that they worked so hard to earn,” says Principal Deputy Assistant Secretary of Labor for the EBSA Jeanne Klinefelter Wilson. “In fiscal year 2020 alone, EBSA’s investigators helped missing and nonresponsive participants recover benefits with a present value of more than $1.4 billion.”

More guidance may come soon from the IRS, as guidance on how to handle missing participants and uncashed checks is listed in its 2020-2021 Priority Guidance Plan.

In a statement, Aliya Robinson, senior vice president of retirement and compensation at The ERISA Industry Committee (ERIC), said: “ERIC is pleased that the Department of Labor has released much-needed guidance on missing participants. ERIC has worked closely with the agency for several years to help clarify this situation and today’s guidance is a good first step. The Compliance Assistance Release provides transparency in the DOL’s enforcement efforts and provides a national enforcement standard that employers can look to. While we remain concerned that best practices become de facto requirements, we appreciate the sharing of policies and operations that have been successful. ERIC looks forward to continuing working with the agency on our shared goal of ensuring that all plan participants receive the benefits that they are due.”