DOL Proffers Guidance on Missing Participants

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 leave a job and move to a new employer. Plan administrators and sponsors are then faced with a dilemma – and sometimes unclear or evolving guidance from government agencies that oversee employee retirement plans. Now the Department of Labor (DOL) has taken steps to address missing ERISA plan participants and beneficiaries.

On January 12, 2021, the DOL’s Employee Benefits Security Administration (EBSA) released guidance to help plan fiduciaries meet their obligations under ERISA to find and distribute retirement benefits to missing or nonresponsive participants:

Best Practices for Pension Plans

EBSA conducted a nationwide compliance initiative to help retirement plans focus on the best ways to compile and maintain accurate plan participant and beneficiary information, communicate benefits eligibility criteria to participants and beneficiaries, and implement the most effective methods to locate missing participants and beneficiaries.

EBSA identified a number of “red flags” that can indicate a plan sponsor has a problem with missing participants, including:

  • More than a small number of missing or nonresponsive participants.
  • More than a small number of terminated vested participants who have reached normal retirement age but have not started receiving their pension benefits.
  • Missing, inaccurate, or incomplete contact information, census data, or both.
  • Absence of sound policies and procedures for handling mail returned marked “return to sender,” “wrong address,” “addressee unknown,” or otherwise, and undeliverable email.
  • Absence of sound policies and procedures for handling uncashed checks.

Through its investigations, EBSA identified four key best practices and provided recommendations for each to minimize the problem of missing participants:

Maintain accurate census information for the plan’s participant population.

  • Contact participants, both current and retired, and beneficiaries on a periodic basis to confirm or update their contact information. 
  • Include contact information change requests in plan communications and a reminder to advise the plan of any changes in contact information.
  • Flag undeliverable mail/email and uncashed checks for follow-up.
  • Maintain and monitor an online platform for the plan that participants can use to update contact information.
  • Provide prompts for participants and beneficiaries to confirm contact information upon login to online platforms.
  • Regularly request updates to contact information for beneficiaries, if any.
  • Regularly audit census information and correcting data errors.
  • In the case of a change in record keepers or a business merger or acquisition by the plan sponsor, address the transfer of appropriate plan information (including participant and beneficiary contact information) and relevant employment records (e.g. next of kin information and emergency contacts). 

Implement effective communication strategies.

  • Use plain language and offer non-English language assistance when appropriate.
  • State upfront and prominently what the communication is about.
  • Encourage contact through plan/plan sponsor websites and toll free numbers.
  • Build steps into the employer and plan onboarding and enrollment processes for new employees, and exit processes for separating or retiring employees, to confirm or update contact information.
  • Communicate information about how the plan can help eligible employees consolidate accounts from prior employer plans or rollover IRAs.
  • Clearly mark envelopes and correspondence with the original plan or sponsor name for participants who separated before the plan or sponsor name changed.

Conduct missing participant searches.

  • Check related plan and employer records for participant, beneficiary and next of kin/emergency contact information. 
  • Check with designated plan beneficiaries and the employee’s emergency contacts for updated contact information.
  • Use free online search engines, public record databases, obituaries, and social media to locate individuals.
  • Use a commercial locator service, a credit-reporting agency, or a proprietary Internet search tool to locate individuals.
  • Attempt contact via United States Postal Service (USPS) certified mail or private delivery service to the last known mailing address.
  • Attempt contact via other available means such as email addresses, telephone and text numbers, and social media.
  • If participants are nonresponsive over a period of time, use death searches (e.g., Social Security Death Index) as a check.
  • Reach out to the colleagues of missing participants by, for example, contacting employees who worked in the same office or by publishing a list of “missing” participants on the company’s intranet, in email notices to existing employees, or in communications with other retirees who are already receiving benefits. 
  • Register missing participants on public and private pension registries with privacy and cyber security protections and publicize the registry through emails, newsletters, and other communications to existing employees, union members, and retirees.

Document procedures and actions.

  • Reduce the plan’s policies and procedures to writing to ensure they are clear and result in consistent practices.
  • Document key decisions and the steps and actions taken to implement the policies.
  • Ensure third party record keepers are performing agreed upon services, and work with the record keeper to identify and correct shortcomings in the plan’s recordkeeping and communication practices, including establishing procedures for obtaining relevant information held by the employer.

Compliance Assistance Release 2021-1

This release outlines the general investigative approach that will guide all of EBSA’s regional offices under the Terminated Vested Participants Project (TVPP) and facilitate voluntary compliance efforts by plan fiduciaries. The release details the information EBSA requests from plan sponsors and the errors they look for in determining whether there are systemic issues in the plan’s administration of terminated vested participant benefits.

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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