On January 12, 2021, the DOL’s Employee Benefits Security Administration (EBSA) issued guidance on locating missing retirement plan participants. In recent years, EBSA has focused its enforcement efforts on steps taken by retirement plans to locate “missing participants” who are entitled to benefits under a plan. In 2019, the DOL highlighted its enforcement successes when it announced that its missing participants initiative (the “Terminated Vested Participant Project”) had contributed to over $1.5 billion in benefit collections from plans. With the release of this guidance, we can only assume these successes will increase.
EBSA’s fiduciary guidance on locating and distributing retirement benefits to missing or nonresponsive participants comes in three parts (collectively, the “Guidance”). The first part of the Guidance (Missing Participants – Best Practices for Pension Plans) provides a list of best practices fiduciaries and plan administrators (including those of DC plans) should use in developing missing participant processes. The second part of the Guidance (Compliance Assistance Release 2021-01) outlines the general investigative approach followed by EBSA’s regional offices under the Terminated Vested Participants Project. Finally, the third part of the Guidance (Field Assistance Bulletin 2021-01) authorizes fiduciaries and plan administrators of terminating defined contribution plans to use the Pension Benefit Guaranty Corporation’s (PBGC) missing participant program for applicable account balances.
Missing Participants -- Best Practices for Pension Plans
In general, this part of the Guidance provides a list of best practices to find missing participants, which includes:
- checking related plan and employer records for participant, beneficiary and next of kin/emergency contact information;
- 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;
- attempting contact via other available means such as email addresses, telephone and text numbers and social media; and
- contacting former colleagues and listing missing participants’ names on company intranet sites.
Additionally, the Guidance asserts that a sound fiduciary process requires ongoing efforts to keep contact information in census files up to date rather than waiting to rely on participant searches when participants are determined to be missing or nonresponsive. For instance, the Guidance encourages fiduciaries and plan administrators to implement the following best practices:
- periodically updating census files;
- implementing effective communication strategies;
- conducting missing participant searches; and
- maintaining appropriate document procedures.
While this part of the Guidance promotes the overarching fiduciary duties of monitoring and loyalty, fiduciaries and plan administrators should carefully assess the prudence of implementing any of these best practices, especially in the current era of fraud, cybersecurity risks, ID theft, etc.
Compliance Assistance Release 2021-01
The second part of the Guidance is drafted in memorandum form to regional directors on standardizing the approach for missing participants under investigations or audits, which addresses the following items:
- audit triggers;
- information requested;
- errors identified; and
- closing the investigation.
This is a welcome development in that it provides fiduciaries and plan administrators with uniformity and helps set expectations.
Field Assistance Bulletin 2021-01
The final part of the Guidance authorizes, as a matter of enforcement policy, plan fiduciaries of terminating defined contribution plans to use the PBGC’s missing participant program for missing or nonresponsive participants’ account balances. The Guidance describes which participant accounts may be transferred to the PBGC and the rules for participant notices.
Moreover, the Guidance notes that the 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.
This is also a welcome development for fiduciaries and plan administrators as compliance with FAB 2021-01 can strengthen arguments of fiduciary prudence—funds are better preserved, the PBGC is a better centralized repository and the PBGC has no commercial incentive for not reuniting participants with their funds.
While much of the Guidance is welcome and provides reasonably objective methods to help locate missing participants and simultaneously eliminate headcounts and recordkeeping fees, fiduciaries and plan administrators should remember that no good deed goes unpunished. Implementing the Guidance still requires thoughtful fiduciary action and consideration. As such, we recommend that fiduciaries and plan administrators carefully review and update their policies and procedures for communicating with terminated vested participants and locating missing participants.