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PBGC Expands Missing Participant Program to Cover Defined Contribution Plans

On December 22, 2017, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations that expand its existing missing participants program to defined contribution plans (DC plans). Although the new regulations apply to other types of plans (e.g., multiemployer plans), this article focuses on the expansion of the program to DC plans. The Pension Protection Act of 2006 authorized this expansion, and in September of 2016, the PBGC issued proposed regulations. The final regulations, which are similar to, but not the same as the proposed regulations, are applicable to DC plans where the date of the plan termination is after calendar year 2017. The regulations provide that the PBGC may “in appropriate circumstance extend deadlines, excuse noncompliance, and grant waivers” in order “to promote the purposes of the missing participants program.” Query whether the PBGC would allow a DC plan that terminated prior to 2018 to use the new program under this provision.

The new missing participant program for DC plans, which is applicable only to terminating plans, is voluntary. Under the final rules, a DC plan may choose to be a “transferring plan”, which means that the plan has elected to transfer benefits to the PBGC for distribution to participants, or alternatively, a “notifying plan”, which means that the plan simply provides information to the PBGC about the disposition of participants’ benefits.

Although voluntary, the program transferring plans is “all or nothing”. If a plan elects to be a transferring plan, it may not choose to turn over the accounts of some participants and not others. This anti-cherry-picking rule does not apply to notifying plans. However, a notifying plan must satisfy the diligent search requirement (described below) for any participant that is identified as missing in its filing with the PBGC.

The new program is designed to hold retirement benefits for missing distributees and help them find and receive their benefits. A “missing distributee” is defined to include a distributee (either a participant or a beneficiary) when one or more of the following conditions exists: (1) the plan does not know with reasonable certainty the location of the distributee; (2) the distributee has failed to elect a form of distribution following a notice about the distribution; or (3) the distributee fails to accept a lump sum payment made to the distributee either by the terms of the plan or pursuant to an election made by the distributee. A lump sum paid by check is not accepted if the check remains uncashed after (a) the check is stale, or (b) the check is not cashed by the “cash by” date and that date is at least 45 days following issuance of the check.

To utilize the program, the plan administrator must file a Form MP-200 and Schedules A (for notifying plans) and B (for transferring plans), as applicable. These forms are posted on the PBGC website (; however, as of the publication date of this article, the instructions are still in draft pending OMB approval. According to the preamble, there will be no charge for small accounts of $250 or less or for information sent to the PBGC by a notifying plan. A one-time charge of $35 is imposed by the PBGC for transferring a missing participant’s account.

The PBGC has specifically declined to comment on whether this administrative fee may be charged against a participant’s account. Draft instructions for the Form MP-200 provide that the total amount to be transferred to the PBGC includes aggregate account balances to be transferred plus the administrative fee for each account in excess of $250. Presumably, this arrangement would require payment of the administrative fee separately and therefore would preclude a direct charge against the participant’s account for the fee unless it is taken in advance of the transfer to the PBGC. Depending on the circumstances, it may be possible for the administrative fees to be paid out of the transferring plan’s forfeiture account.

In order to take advantage of the program, a terminating DC plan eligible for the program must conduct a diligent search for each missing distributee and the search must be conducted within nine months before a filing is made with the PBGC identifying the individual as a missing distributee. A “diligent search” is defined as a search that is “in accordance with regulations and other applicable guidance issued by the Secretary of Labor under section 404 of ERISA.” The preamble to the final regulations makes specific reference to the DOL’s regulatory safe harbor for terminating plans under 29 CFR 2520.104b-1(b)(1), which permits a distribution to be made with no search other than a notice sent to the participant’s last known address. However, the preamble further provides that if the notice is returned as undeliverable, then the search requirements of Field Assistance Bulletin 2014-1 are triggered.

The pay-out rules provide for a lump sum payment when the benefit transfer amount is de minimis ($5,000 or less) and an annuity when the amount is non-de minimis (more than $5,000). For married participants, the default annuity is a joint and 50% survivor annuity. Participants will be permitted to elect a lump sum (or another type of annuity), but this alternative is available to married participants only if their spouses consent. The annuity form of pay-out is applicable even if the DC plan from which the benefit transfer amount came did not offer an annuity form of benefit.

For more information about the PBGC’s expansion of its missing participants program to DC plans, please contact Alison Fay or any of the other attorneys at Boutwell Fay LLP.

© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of December 29, 2017.

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