Jamie Ann Hayes, QPFC, C(k)P, AIF(r)

Jamie Ann Hayes, QPFC, C(k)P, AIF(r), Partner and Consultant of FiduciaryFirst, specializes in Employer Retirement Plan Fiduciary Services and Corporate Pension Consulting.

Missing Participants: Are You Doing Enough to Find Them?

Missing Participants: Are You Doing Enough to Find Them?

Recent Department of Labor (DOL) letters have threatened sanctions against plan fiduciaries for potential Employee Retirement Income Security Act (ERISA) violations regarding the handling of missing participants. The DOL also cited potential violations involving the timeliness of required minimum distributions for participants nearing the age of 701/2. This occurred despite a lack of clear-cut guidance from the DOL regarding best practices and appropriate administrative procedures for handling instances where prior employees cannot readily be located.

As a result, plan sponsors have been required by Labor Department auditors to follow procedures regarding required minimum distributions (RMDs) not documented from any previous formal guidance. In response to concerns expressed by plan sponsors, the Internal Revenue Service, DOL and Pension Benefit Guaranty Corp. (PBGC) have released guidance regarding the steps plan sponsors and administrators should take when attempting to locate separated participants, including:

  • Searching plan, employer, sponsor or other publically available sources of contact information for participants.
  • Using commercially available locator services, credit reporting agencies, or proprietary online search tools for locating individuals.
  • Sending a notice via certified mail through the U.S. Postal Service to the participant’s last known mailing address.
  • Documenting attempts at contact through appropriate measures for any address or contact information (address, telephone or email) or of designated beneficiaries.
  • Other search measures as dictated by specific circumstances.

 

PBGC Missing Participant Program Expansion

Additionally, the Pension Benefit Guaranty Corporation has expanded its Missing Participants Program to apply to most terminated defined contribution plans that terminate on or after Jan. 1, 2018 (excluding governmental plans, church plans and non-ERISA 403(b) plans).

Plans can opt to be a “transferring plan” that transfers the amount of the benefits to the PBGC for disbursement once the participant is located or a “notifying plan” that sends the PBGC information about the institution responsible for providing the benefit — in which case, when the missing participant is located, the PBGC would share that information with the beneficiary. There is a charge only for the transferring plan, and only when a payment obligation of more than $250 is transferred.

More intense scrutiny by the DOL and IRS regarding RMDs point to an increased need for plan sponsors and administrators to reevaluate and maintain comprehensive audit trails documenting their procedures for locating missing participants.

References:

https://www.irs.gov/retirement-plans/missing-participants-or-beneficiaries

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2014-01

https://www.winston.com/en/thought-leadership/missing-participants-and-required-minimum-distributions.html

https://www.asppa.org/News/Article/ArticleID/9743

https://www.drinkerbiddle.com/insights/publications/2018/02/searching-for-missing-participants

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