403(b) Curriculum Library


DOL Tips to Address Missing Participants

The issue of missing participants can be the bane of retirement plan sponsors, particularly those at larger organizations. Not only can missing participants reduce the purchasing power of plans by reducing average account balances, but they also create compliance and cybersecurity issues.

Aside from the challenges the issue presents for plan sponsors, it is also one of heightened focus for the Department of Labor (DOL). As a point of emphasis in their retirement plan investigations, it is understandable why retirement plan sponsors desire to minimize the number of missing participants.

On January 12, 2021, the Department of Labor (DOL) released guidance on locating missing participants, expanding on past guidance that mostly focused on enforcement. A break from tradition, the guidance included three separate documents, including:

  • Best Practices – A practical guide on action steps that plan sponsors should take with respect to missing participants.
  • Compliance Assistance Release 2021-01 – A document describing the approach for regional offices during investigations regarding terminated vested participants.
  • Field Assistance Bulletin 2021-01 – A piece outlining the enforcement policy on the use of the Pension Benefit Guaranty Corporation’s (PBGC) expanded Missing Participants Program for terminating defined contribution plans.

Red Flags

While most plan sponsors are faced with at least some missing participants, the “red flags,” as the DOL terms them in the Best Practices document, outline situations that may indicate to an organization that it has a missing participant problem. Below are some of the red flags:

More than a small number of missing or non-responsive participants

If a plan sponsor is unaware of how many missing or non-responsive participants they have, the recordkeeper and/or TPA should be able to tell them.

More than a small number of terminated vested participants who have reached normal retirement age but have not started receiving their pension benefits

If these participants are over age 72, they will not have taken their Required Minimum Distributions (RMDs); thus, there is extra incentive to track them down. A plan’s recordkeeper/TPA can be of assistance.

Missing, inaccurate, or incomplete contact information, census data, or both

This can include incorrect or out-of-date mail, email, or other contact information, partial Social Security numbers, missing birthdates, missing spousal information, or placeholder entries. If a plan sponsor has not cleaned up the file feed to their recordkeeper/TPA lately, this is likely to be an issue.

Absence of sound policies and procedures for handling returned

Policies surrounding returned mail marked “return to sender,” “wrong address,” “addressee unknown,” and undeliverable email can also be helpful for other employee benefits. Plan sponsors should not assume that their recordkeeper/TPA is taking care of this.

Absence of sound policies and procedures for handling uncashed checks

Per the DOL’s example, this could include the absence of an accounting journal or similar record of uncashed checks, a substantial number of stale uncashed distribution checks, or failure to reclaim stale uncashed check funds in distribution accounts. This is likely the most serious issue related to missing participants, outside of the potential cybersecurity breaches. Thus, establishing a clear policy is of the utmost importance.

Addressing Issues

In addition to identifying potential red flags for missing participant issues, the DOL’s guidance also lists a variety ways that these issues can be addressed. Below are some of these potential solutions:

Maintain accurate participant information

  • Contact participants (both current and retired) and beneficiaries on a periodic basis to confirm or update their contact information. Relevant contact information includes home and business addresses, telephone numbers (including cell phone numbers), social media contact information, and next of kin and/or emergency contact information. Well-run plans regularly reconfirm this information to ensure its accuracy. Plan sponsors can also look to integrate this follow-up into their overall process of participant engagement.
  • Include contact information change requests in plan communications, along with a reminder to advise the employer of any changes in contact information.
  • Flag undeliverable mail and/or email and uncashed checks for follow-up. Ideally, the plan’s recordkeeper/TPA provides this information to the plan sponsor on a quarterly, or even monthly, basis, depending on the plan size and the extent of the missing participant problem.
  • Maintain and monitor an online platform for the plan that participants can use to update contact information for themselves and their spouses/beneficiaries. Incorporate these updates into the plan’s census information. This is an expensive solution, unless the plan sponsor’s HRIS or another operating system (or the plan recordkeeper/TPA’s operating system) already offers this feature.
  • Provide prompts for participants and beneficiaries to confirm contact information upon online platform login. Some bundled recordkeepers have already begun to integrate these prompts on their platforms.
  • Regularly request updates to contact information for any beneficiaries. By updating beneficiary information, a number of compliance issues, such as ensuring that proper spousal consent is obtained for certain beneficiary designations, are also addressed.
  • Regularly audit census information and correct data errors. This can be incorporated into the annual Form 5500 audit process for ERISA plan sponsors.
  • In the event of a recordkeeper change 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). EBSA has found that in the context of an acquisition, merger, or divestiture, well-run plans make missing participant searches of plan, related plan (e.g., health plan) and employer records (e.g., payroll records) part of the collection and transfer of records. Recordkeeper changes often bring plan compliance issues to light, so particular care should be taken to ensure plan information is accurate.

Implement effective communication strategies

  • Use plain language and offer non-English language assistance when and where appropriate. This can be especially helpful if there are employee populations where English is not the primary language.
  • State upfront and prominently what the communication is about. For example, eligibility to begin the payment of pension benefits, a request for updated contact information, etc.
  • Encourage contact through the 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, confirm information needed to determine when benefits are due, to correctly calculate the benefits owed, and advise employees of the importance of ensuring that the plan has accurate contact information at all times.
  • Communicate information about how the plan can help eligible employees consolidate accounts from prior employer plans or rollover IRAs. Generally, the fewer retirement plan accounts a participant has, the easier it is for that individual to keep track of them.
  • Clearly mark envelopes and correspondence with the original plan or sponsor name for participants who separated before a plan or sponsor name change. For example, during a corporate merger, indicate that the communication relates to pension benefit rights.

Conduct thorough participant searches

  • Check related plan and employer records for participant, beneficiary, and next of kin/emergency contact information. While the plan may not possess current contact information, it is possible that the employer’s payroll records or the records maintained by another of the employer’s plans, such as a group health plan, may have more up-to-date information. If there are privacy concerns, the person engaged in the search can request that the employer or other plan fiduciary forward a letter from the plan to the missing participant or beneficiary.
  • Check with designated plan beneficiaries (e.g., spouse, children) and the employee’s emergency contacts (which may be listed in an employer’s records) for updated contact information. If there are privacy concerns, ask the designated beneficiary or emergency contact to forward a letter to the missing participant or beneficiary.
  • Use online resources and other publicly available data to help locate individuals. Search engines, public record databases, such as those for licenses, mortgages and real estate taxes, obituaries, and social media can help locate missing participants.
  • Use a commercial locator service, a credit-reporting agency, or a proprietary internet search tool to help locate individuals.
  • Attempt to contact via the United States Postal Service (USPS) certified mail, or private delivery service with similar tracking features, to the last known mailing address.
  • Attempt to contact via other available means, such as email addresses, telephone and text numbers, and social media.
  • Use death searches, such as the Social Security Death Index, for longer-term nonresponsive participants. To the extent that such a search confirms a participant’s death, redirect the communications to beneficiaries. Unfortunately, many older missing participants are, in fact, deceased. This can create its own issues, as missing participants are less likely to have designated valid beneficiaries.
  • Reach out to the colleagues of the missing participants. For example, contact employees who worked in the same office, publish a list of “missing” participants on the company’s intranet, include notices to existing employees via email or in retiree communications. Similarly, for unionized employees, reach out to the union’s local office and use union member communications to help find missing retirees.
  • Register missing participants on public and private pension registries with privacy and cyber security protections (e.g., National Registry of Unclaimed Retirement Benefits). Publicize the registry through emails, newsletters, and other communications to existing employees, union members, and retirees.
  • Search regularly, using some or all of the above steps.

Document procedures and actions

  • Put the plan’s policies and procedures in 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 that recordkeepers are performing agreed-upon services (for those plans that use third-party recordkeepers to maintain plan records and handle participant communications). Work with the recordkeeper to identify and correct shortcomings in the plan’s recordkeeping and communication practices and establish procedures for obtaining relevant information held by the employer.

Conclusion

With the heightened DOL focus and the potential purchasing, compliance, and cybersecurity issues surrounding missing participants, plan sponsors should heed these recently released best practices. By making a good faith effort to locate participants – and taking steps to prevent them from going missing in the first place – plan sponsors may be able to protect themselves from future DOL investigations. Ultimately, all plan sponsors should want to locate participants to ensure they receive the retirement plan assets to which they are entitled.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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