Retirement plan fiduciaries can get help to locate and distribute retirement benefits to missing plan participants under guidance that the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) issued on January 12, 2021. Through contrasting lists of “red flags” and “best practices,” the guidance reveals the DOL’s expectations of plan administrators and provides helpful guideposts for them to follow. The new guidance for complying with the Employee Retirement Income Security Act (ERISA) consists of three parts:

• Missing Participants—Best Practices for Pension Plans describes best practices that fiduciaries of defined benefit pension plans or 401(k)-type defined contribution plans can take to ensure those plan participants receive promised benefits when they reach retirement age.

• Compliance Assistance Release 2021-01 outlines the general investigative approach that will guide enforcement actions by EBSA’s regional offices under the Terminated Vested Participants Project, which can aid voluntary compliance efforts by plan fiduciaries.

• Field Assistance Bulletin 2021-01  authorizes fiduciaries of terminating 401(k)-type plans to use the Public Benefit Guaranty Corp. (PBGC) Defined Contribution Missing Participants Program to hold missing or nonresponsive participants’ account balances and to help those participants find and receive their benefits.

As evidenced by its words and actions over the past several years, the DOL has been intently focused on identifying and rehabilitating plans with what it considers lax protocols for ensuring participants stay connected to their retirement plan benefits. For this reason, it is worthwhile for plan administrators to review the complete lists of red flags and best practices in the publication. However, if there is one clear takeaway from the publication it is that plan administrators should be proactive in maintaining and, if necessary, regaining contact with participants. In the eyes of the DOL, taking ad hoc steps to find participants only after they are owed a distribution or just mailing a check to their last known address may not be enough.

Red Flags — Being Reactive

EBSA’s best practices guidance lists several “red flags” that indicate a plan may have a problem with missing or non-responsive participants, such as:

• More than a small number of missing or non-responsive participants

• More than a small number of retired participants not receiving benefits
• Missing or outdated contact information and census data
• Absence of sound policies for handling returned mail
• Absence of sound policies for handling uncashed checks

Document, document, document. As reflected in the publication, the DOL expects that plan administrators will track participants with stale contact information, keep a record of mail that has been returned, and account for checks that are uncashed.

Best Practices — Being Proactive

The DOL states in the publication that the following “best practices” are effective at minimizing and mitigating the problem of missing or non-responsive participants:

Maintaining accurate census information for the plan’s participant population. At regular intervals, plan administrators should review and update contact information for participants and beneficiaries and prompt participants to update their information.

Implementing effective communication strategies. The nature of communications to participants should be clearly identified, and the content should be concise and readable.  Additionally, plan administrators should have a process for obtaining and regularly confirming that participant contact information is up to date.

Missing participant searches. The DOL has previously denoted search steps that plan administrators should take in Field Assistance Bulletin 2014-01. Such guidance only technically applies to plan administrators of terminating defined contribution plans. However, because it has been the only guidance from the DOL regarding search steps for missing participants, it has also been relied on by plan administrators of ongoing plans. In addition to those previously stated in Field Assistance Bulletin 2014-01, this new publication describes the following search steps:

• Attempt contact through social media;
• If a participant is unresponsive for a long period, use death searches, such as the Social Security Death Index;
• Contact colleagues of missing participants;
• Publish a list of missing participants on the company’s intranet or email the list to current employees;
• For union employees, contact the local union office; and
• Register missing participants on pension registries with privacy and cybersecurity protections (e.g., National Registry of Unclaimed Retirement Benefits).

Documenting procedures and actions. Plan administrators should create and follow policies for avoiding, identifying, and rectifying missing participants, and they should document the steps taken to implement the policies. Also, they should ensure any third-party administrator has a sound policy for this purpose and is following it.

If you have any questions about retirement plan administration for missing participants, please contact your MCM representative or Kathy Doughten via email Kathy.doughten@mcmcpa.com or telephone at 502-882-4390.