DOL Hot on the Trail of Missing ERISA Plan Participants

Missing people, missing money. It’s hard to believe people would leave retirement funds behind when they move to a new job. But it happens. In fact, many people fail to roll over retirement plans when they move to a new employer. Plan administrators and sponsors then are faced with a dilemma – and sometimes unclear or evolving guidance from government agencies that oversee employee retirement plans. Currently, the Department of Labor (DOL) is taking steps to address missing ERISA plan participants.

It started with one DOL office

Audits are nothing new. The DOL has the power to audit any retirement plan to ensure compliance with government regulations. However, the Philadelphia DOL office began targeting defined benefit plans with a high number of terminated vested participants who:

  • were not receiving payments, and
  • had not received payouts.

In some cases, plan sponsors informed the DOL that plan participants were simply missing. However, when contacted by the Philadelphia DOL, it became apparent that many participants simply had not known they had money sitting in their former retirement plans.

By following up, the Philadelphia DOL was able to recover more than $165 million for these missing ERISA plan participants.

Going forward, the DOL intends to treat failure to locate missing plan participants as a breach of fiduciary duty under ERISA. Non-compliant plans may face significant penalties. This is somewhat of a reversal of a former DOL attitude that plans simply wait for participants to locate them.

The Internal Revenue Service has a role also

Plan administrators and sponsors may run afoul of Internal Revenue Service guidelines contained in its October 19, 2017, Memorandum for Employee Plans Examinations Employees. In this memorandum, examiners are advised not to challenge qualified plans for required minimum distribution (RMD) failures under certain circumstances if the plan:

  • “searched plan and related plan, sponsor, and publicly-available records or directories for alternative contact information;
  • Used any of the search methods below:
    • a commercial locator service;
    • a credit reporting agency; or
    • a proprietary internet search tool for location individuals; and
  • attempted contact via United States Postal Service (USPS) certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).

Does your company have missing ERISA plan participants?

Expect an increase on audits specifically targeting employers with missing retirement plan participants. Plan sponsors should work with ERISA counsel to establish a paradigm forlocating and contacting terminated vested plan participants.

At Hall Benefits Law, we work extensively with clients to ensure they establish and maintain a process for locating missing participants upon a retirement plan termination. We also work with employers to design strategically-designed, legally-compliant employee benefit plans that accommodate their unique employee population and meet their goals. Please call 678-439-6236 to discuss your concerns with an experienced attorney. Our website contains more information about our firm, a Contact Form, and free resources for your review. From our home office in Georgia, we assist clients throughout the United States.

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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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