At an Aug. 28, 2013, hearing held by the Department of Labor's ERISA Advisory Council (EAC) to consider the problem of lost and missing participants from 401(k) and other defined contribution retirement plans, American Airlines Senior Benefits Counsel Vicki Blanton pleaded for more regulatory guidance to assist plan sponsors in locating these participants and ensuring they receive their due benefits.
In her testimony on behalf of the American Benefits Council, an employers group representing benefit plan sponsors, Blanton said that “with proper guidance, plans could save millions of dollars in wasted postage and the cost of printing while advancing the intended goal of reaching and informing participants of plan benefits.”
Among Blanton’s recommendations:
- DOL should consider new or coordinated guidance on the Pension Benefit Guaranty Corp.’s (PBGC) recently issued request for information on whether and how the PBGC should implement a missing-participant program for terminating defined contribution plans, similar to its program for terminating defined benefit pension plans.
- DOL should revise existing guidance to make electronic delivery easier, regardless of whether an employee has regular computer access as part of his or her duties.
- DOL should clarify that plans (and, therefore, the plan’s active participants) will not bear the substantial expense of tracking lost or missing participants. The department should also explain how extensively a plan must search for a participant.
- DOL should consider putting out clear guidance on plan coordination with state escheatment programs that would allow a plan to decide whether to participate in such programs with fiduciary protection.
“Our ongoing plans present unique challenges, given the mobile employee population and base transfers, which cause a need for additional data,” Blanton testified. “The issuance of clarifying guidance—with an understanding of the cost and administrative burdens imposed upon plan sponsors—would make the location of lost participants much more effective.”
The ERISA Industry Committee (ERIC), along with the Plan Sponsor Council of America (PSCA) and the U.S. Chamber of Commerce submitted a group letter the PBGC supporting the agency’s efforts to implement a missing participants program in 401(k) and similar plans.
“ERIC believes that a missing participant program run by the PBGC would create a win-win situation for both sponsors and participants, as terminating plans oftentimes cannot find lost participants, and participants many times don’t know where to look for lost benefits or cannot find their former plan,” said Kathryn Ricard, ERIC’s senior vice president for retirement policy, in a separate statement.
The letter explained that there is significant demand for a missing participants program, as plan sponsors are frequently unable to find IRA providers to accept smaller account balances, particularly those with less than $1,000.
“We anticipate that many fiduciaries would be interested in using services provided by the PBGC, particularly for smaller accounts. However, the demand for such services would be impacted by the fees charged by the PBGC and any regulatory burden that was imposed,” Ricard said.
ERIC, PSCA and the Chamber recommended that the PBGC create a program whereby fiduciaries of terminating plans that transfer the accounts for missing participants to the PBGC can be confident that:
- The funds will be handled appropriately.
- The account will be charged no more than reasonable fees.
- The participant (once found) will be able to obtain an accounting of the manner in which their funds have been handled by the PBGC.
- The administrative burden is not significant. The group recommended that any program be optional, as provided in the PPA.
The groups also encouraged the PBGC to coordinate with the U.S. Department of Labor to provide fiduciary relief for plans that use the missing participants program. However, they emphasized that the PBGC should not delay the creation of the program in order to obtain this relief.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Related SHRM Articles:
Missing Retirement Plan Participants: Please Take Your Money, SHRM Online Benefits, December 2010
401(k) Auto Enrollment—The Problem of Missing Beneficiaries, SHRM Online Benefits, August 2011
Retirement Plans: Former Employees Can Be Current Problems, SHRM Online Benefits Discipline, July 2010
Retirement Plan Sponsors Should Keep Track of Former Employees, SHRM Online Benefits Discipline, February 2009
Related External Article:
The Search for Missing 401(k) Money, Forbes, August 2013
Finding Lost Participants, Benefit Resources Blog, February 2013
Finding Missing Participants Without the IRS Letter-Forwarding Program, Buck Consultants, September 2012
SHRM Online Benefits page
SHRM Online Retirement Plans Resource Page