Prevent & Locate Missing Participants in Your Retirement Plans

MARCH 2, 2021

To ensure plan participants and beneficiaries are paid their full retirement benefits when due, plan fiduciaries are obligated to maintain accurate records and census information. For several years now, when investigating and auditing retirement plans, the U.S. Department of Labor (DOL) has focused on the issue of keeping accurate records and locating missing participants. The DOL has observed both poorly executed practices and well-run practices in regard to these.

In response, the DOL has now undertaken a nationwide compliance initiative to help all retirement plan fiduciaries focus on best practices to:

• Maintain complete and accurate census information
• Communicate benefit eligibility to participants and beneficiaries
• Implement effective policies and procedures

As part of this initiative, on January 12, 2021, the DOL released three documents that provide additional guidance to employers: Missing Participants: Best Practices for Pension Plans; Compliance Assistance Release No. 2021-01; and Field Assistance Bulletin No. 2021-01. Following are overviews of each.

Missing Participants: Best Practices for Pension Plans

This memorandum outlines the best practices that fiduciaries of both defined benefit and defined contribution plans can follow to ensure plan participants and beneficiaries receive promised benefits when they reach retirement age. The guidance recognizes that in order to ensure benefits are paid on time, retirement plan fiduciaries must:

• Maintain accurate census records
• Implement effective communication strategies
• Search for missing participants regularly and often, and document procedures and actions taken to prevent and locate missing participants 

The guidance gives an extensive list of specific actions that plan fiduciaries should consider taking to minimize and mitigate the problem of missing or unresponsive participants. The guidance also identifies common red flags that indicate a plan may have a missing participant problem, such as not having policies that address returned mail, uncashed checks, or incomplete or inaccurate census records (e.g., missing or invalid date of birth, date of hire, spousal information or social security number).

Compliance Assistance Release No. 2021-01

The DOL released this memorandum to ensure consistent investigative processes and case-closing practices are followed by all Regional Offices when conducting Terminated Vested Participant Project (TVPP) investigations and audits, as well as to facilitate voluntary compliance efforts by plan fiduciaries. Similar to the Missing Participants — Best Practices for Pension Plans, TVPP investigations and audits are performed to ensure plan fiduciaries:

• Maintain adequate census and other records
• Have appropriate procedures for notifying participants and beneficiaries of benefits
• Implement appropriate search procedures

In addition to plan documents, TVPP audits generally request participant census records, actuarial reports, plan procedures for communicating with terminated vested participants and beneficiaries, and plan procedures and practices for reaching out to missing or unresponsive participants and beneficiaries. TVPP audits look for systemic errors in plan recordkeeping and administration that result in:

• Terminated vested participants or beneficiaries being unable to commence benefits prior to death or prior to reaching their required minimum distribution beginning date
• Inadequate procedures for contacting terminated vested participants or beneficiaries nearing normal retirement age
• Inadequate procedures for addressing uncashed distribution checks

Field Assistance Bulletin No. 2021-01

This document states that the DOL will not pursue violations (under section 404(a) of ERISA) against plan fiduciaries of terminating defined contribution plans or Qualified Termination Administrators (QTAs) of abandoned plans in connection with the transfer of a missing or unresponsive participant’s or beneficiary’s account balance to the PBGC, rather than to an IRA, certain bank accounts, or to a state unclaimed property fund. This assumes the plan fiduciary or QTA complies with the guidance in this memorandum and the PBGC participant regulations, and has acted in accordance with a good- faith, reasonable interpretation of section 404(a) of ERISA. However, the DOL may still pursue violations under sections 404(a) or 406 of ERISA for a failure to diligently search for participants and beneficiaries prior to the transfer of their account balances to the PBGC. The DOL may also pursue violations for a failure to maintain plan and employer records.

Conclusion

It’s clear that the DOL expects plan fiduciaries to establish comprehensive policies and procedures to prevent and locate missing participants, and that such policies and procedures should be well documented. USI Consulting Group will be providing additional information on the comprehensive steps and actions that plan fiduciaries need to implement to meet this important fiduciary responsibility.

How USI Consulting Group Can Help

USI Consulting Group (USICG) is a premier provider of defined contribution and defined benefit plan consulting and administration services. For more than 40 years, organizations have relied on us to help their employees successfully plan and invest for retirement. Our team of highly skilled professionals provides specialized expertise in retirement plan design, administration, consulting, investments, regulatory and compliance, and employee communications for 3,800+ clients nationwide.

To learn more about USICG’s retirement consulting services, contact your local USICG representative or visit www.usicg.com.