Wanted: DOL Guidance on Lost, Missing 401(k) Participants

By Stephen Miller, CEBS Aug 30, 2013


Use Internet to Find Missing Participants, DOL Says

The U.S. Department of Labor on Aug. 14, 2014, issued a new set of guidance for tracking missing defined contribution retirement plan participants and distributing their assets. Field Assistance Bulletin 2014-1 takes into account improved Internet search capabilities available to plan sponsors.

Plan fiduciaries can start by using free Internet search tools, which may include search engines, public records, obituaries, and social media, the DOL advised. But “If the free or cheap options don’t work, fiduciaries can’t stop there,” noted an alert by Bryan Cave benefits attorneys. Fiduciaries need to consider how prudent it would be to use other tools, such as commercial locator services, credit reporting agencies, information brokers, and investigation databases.

“Many of those services can be quite cost effective, so it’s important to research them thoroughly before dismissing them out of hand,” according to Bryan Cave. “The DOL notes that the exact steps will depend on the facts and circumstances.”

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.”

Significant Demand

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.​

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