DOL Approves PBGC Missing Participant Program for Defined Contribution Plans

The U.S. Department of Labor (DOL) recently released Field Assistance Bulletin 2021-01 that authorizes, as a matter of enforcement policy, plan fiduciaries of terminating defined contribution plans to use the Pension Benefit Guaranty Corporation (PBGC) missing participant program for missing or nonresponsive participant’s account balances. 

Following the termination of a defined contribution plan, current DOL regulations provide a safe harbor that allow fiduciaries to distribute remaining accounts to IRAs. This safe harbor is conditional, requiring that the plan administrator provide the required distribution notice and that the account holder fails to make a distribution election.

In 2017, the PBGC opened its Missing Participant Program to defined contribution plan fiduciaries, allowing those fiduciaries to transfer remaining account balances to the PBGC rather than an IRA if the fiduciaries had performed a diligent search for missing participants within the past nine months. The PBGC charges a $35 fee per account for the transfer.

FAB 2021-01 now provides that until the DOL updates its safe harbor rules, the agency will not pursue fiduciary violations when missing participants’ balances are transferred to the PBGC instead of to IRAs. However, the bulletin does not provide complete protection against enforcement. 

Fiduciaries and qualified termination administrators must comply in good faith with all other aspects of the DOL safe harbor, and the DOL may still pursue violations for failing to thoroughly search for missing participants prior to transferring balances or failing to maintain plan and employer records. 

Plan fiduciaries must revise the required notices to advise participants of the transfer of their accounts to the PBGC and provide relevant contact information, including the program’s website and telephone contact information. The DOL has provided a model notice as part of FAB 2021-01. If the notice is returned as undeliverable, the plan fiduciary must execute a search for the individual. Following the completion of that search, the DOL considers the notice to have been furnished and that the individual has failed to make an election.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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