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The DOL Offers Guidance on How to Keep Track of Your Plan Participants (Part I)

By: Evan Giller and Ruel Pile

The U.S. Department of Labor (“DOL”) has for some time been concerned about whether retirement plans are adequately keeping track of participants who have separated from service. This issue was originally raised in examinations of plans in the Philadelphia region and then expanded in to a nationwide compliance initiative. The DOL has stated its concern regarding participants who “don’t apply for their pension benefits at retirement time because they don’t know their pension is available or understand the consequences of failing to respond to plan communications.” The DOL takes this issue very seriously, and just last week it sued Met Life over its failure to respond to DOL subpoenas for information in connection with an investigation about Met Life’s failure find and pay benefits to plan participants. However, the DOL has up to this point issued limited guidance about how it expects plans to meet their requirements with respect to missing participants.

On January 12, 2021, the DOL issued three separate documents with guidance on this issue:

  • Best Practices for Pension Plans, which suggests a variety of “best practices” that retirement plans should consider in order to maintain contact with separated participants and how they should try to locate participants with whom they have are out of contact.

  • Compliance Assistance Release 2021-01, which describes the investigative procedures, processes and case closing practices followed by all of the DOL’s regional offices under the Terminated Vested Participants Project for audits of defined benefit plans.

  • Field Assistance Bulletin 2021-01, which authorizes plan fiduciaries of terminating defined contribution plans to use the PBGC missing participant program for missing or nonresponsive participants’ accounts. In general, the purpose of this Bulletin is to assure fiduciaries of terminating defined contribution plans that if they transfer a missing participant’s account balance to the PBGC’s missing participant program instead of using the approaches authorized under existing regulations (e.g., transferring the account to an IRA), that the DOL will not treat such transfer as a fiduciary violation.

This article will focus on the first piece of guidance listed above, the Best Practices for Pension Plans. We will discuss the Compliance Assistance Release and the Field Assistance Bulletin in more detail in Part II of this article in a subsequent newsletter.

The DOL notes that participants and beneficiaries are fully entitled to all their promised benefits, and fiduciaries have an obligation to take appropriate steps to ensure that full benefits are paid when due. It begins its description of best practices by noting that there are a number of “red flags” that indicate that a plan may have a problem with missing or non-responsive participants. Red flags should go up if a plan has:

  1. More than a small number of missing or non-responsive participants, or more than a small number of terminated vested participants who have reached normal retirement age but have not started receiving their benefits.

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

  3. An absence of sound policies and procedures for handling mail sent to participants that is returned or for handing uncashed checks.

The DOL offers examples of best practices for plans to follow a) in order to limit the problem of missing or unresponsive participants, and b) when searching for participants when the plan administrator becomes aware that they are not responding. In the first set of suggestions, the DOL’s has identified two categories. The first category is “Maintaining accurate census information for the plan’s participant populations”, with best practice examples that include:

  1. Periodically contacting participants and beneficiaries to confirm or update their contact information.

  2. Including contact information change requests in plan communications.

  3. Flagging undeliverable mail or email and uncashed checks for follow- up.

  4. Maintaining an online platform that participants can use to update contact information.

The second category is, “Implementing effective communications strategies” and the examples include:

  1. Keep communications clear and use plain language and offer non-English language assistance where appropriate.

  2. Encourage contact through websites and toll free numbers.

  3. Communicate information about how the plan can help consolidate accounts from prior employer plans or IRAs

  4. If the plan or sponsor name changed, clearly mark envelopes and correspondence with the original plan’s name for participants who separated before the name was changed.

With respect to searching for missing participants, the DOL suggests these best practices among quite a few others:

  1. Check other employer records, including other plans or payroll records.

  2. Check with designated plan beneficiaries and the employee’s emergency contacts.

  3. Use free online search engines, public record databases, obituaries and social media.

  4. Use a commercial locator service, a credit-reporting agency, or proprietary internet search tool.

  5. Attempt contact using the Postal Service, or a private delivery service, or email addresses, telephone and text, and social media.

  6. Use a death search such as the Social Security Death Index.

  7. Reach out to colleagues of missing participants or by publishing a list of missing participants on the company’s intranet or by other communications to employees.

  8. Register missing participants on public and private pension registries.

Finally, the DOL says that best practices include reducing the plan’s policies and procedures to writing and documenting decisions.

These best practices are not mandatory requirements and are not binding on plan fiduciaries. Some of the suggestions on the DOL’s list were included in previous guidance on missing participants and in our experience can be quite effective. While this guidance does not create a safe harbor for plan fiduciaries, a showing that the plan followed the DOL’s best practices would certainly be helpful if a question about missing participants is raised on examination.

However, some of the suggestions should be approached with care. For example, any approach that involves a public listing of missing participants, either within an organization or on a public registry, runs the risk of letting sensitive information get into the wrong hands. Given the increase in fraudulent retirement plan claims, posting the names of missing participants could increase the risk of fraud to a plan. In addition, requesting the assistance of colleagues in locating former employees may raise privacy concerns under some circumstances. Therefore, while there is no question that plans need to address the issue of missing participants, fiduciaries should look at these suggestions as a menu of available practices and use their own judgment in determining what will work best, and most safely, for their own plans.

© Boutwell Fay LLP 2021, 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 March 2021.


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