The Department of Labor ("DOL") has undertaken a nationwide compliance initiative to ensure that retirement plan participants receive the benefits that they were promised when they reach their retirement age. To that end, the DOL recently issued three pieces of guidance – (i) Missing Participants - Best Practices for Pension Plans ("Best Practices"), (ii) Field Assistance Bulletin No. 2021-01 ("FAB 2021-01") and (iii) Compliance Assistance Release No. 2021-01 ("CAB 2021-01"). This blog post addresses the Best Practices guidance. FAB 2021-01 (which describes the DOL's temporary enforcement policy regarding use of the Pension Benefit Guaranty Corporation's Missing Participant Program by terminating defined contribution plans) and CAB 2021-01 (which is a memorandum to the DOL's Regional Directors intended to facilitate consistent audit practices in the DOL's Terminated Vested Participant enforcement project and voluntary compliance by fiduciaries) will be addressed in a separate blog post.
The Best Practices guidance issued by the DOL is intended to help retirement plans (i) establish procedures to maintain complete and accurate census information (record-keeping), (ii) communicate with participants and beneficiaries about their eligibility for benefits (communication strategies), and (iii) implement effective procedures for locating missing participants and beneficiaries (missing participant searches). The DOL believes that the implementation of good procedures will reduce the number of missing and non-responsive participants. The guidance is not legally binding on plan fiduciaries; the intent is to provide clarity and tools for plan fiduciaries.
The first step towards establishing good procedures is for plan fiduciaries to identify problems with their plans. The Best Practices guidance identifies the following "red flags" indicating that a plan may have a missing participant problem:
- more than a small number of missing or nonresponsive participants;
- more than a small number of terminated vested participants who have reached the plan's normal retirement age, but have not commenced benefits;
- missing, inaccurate, or incomplete contact information and/or census data (e.g., addresses, emails, birthdates);
- the absence of procedures for handling undeliverable mail, email, and uncashed checks.
Examples of Best Practices
Based on its review and audit of retirement plans, the DOL has compiled lists of best practices for recordkeeping, communication strategies, and missing participant searches.
Recordkeeping. Retirement plan fiduciaries need to ensure that the plans maintain accurate data for plan participants. Practices that help fiduciaries reach this goal include:
- contacting participants and beneficiaries periodically to confirm or update their contact information and including change requests and reminders in plan communications;
- maintaining an online platform that participants and beneficiaries may use to update contact information, and providing prompts to confirm and update contact information when participants and beneficiaries log in;
- requesting regular updates from participants for beneficiary designations;
- ensuring updated information is incorporated into plan census information;
- flagging undeliverable mail and email and uncashed checks for follow-ups;
- regularly auditing census information and correcting data errors; and
- ensuring that plan information and relevant employee records are properly transferred when there is a change in record-keepers or a business merger, acquisition, or sale involving the plan sponsor.
Communication Strategies. Plan fiduciaries may reduce problems associated with missing and non-responsive participants by using effective communication strategies such as:
- using plain language and offering non-English language assistance;
- stating communication topics up-front and in a prominent manner;
- encouraging contact through plan and employer websites and toll-free numbers;
- obtaining updated contact information as part of the plan enrollment process for new employees and as part of the exit process for terminating employees;
- using the original sponsor and plan name in correspondence to participants who separated from service before a change in the plan name or sponsor; and
- communicating information on how participants may consolidate retirement accounts by rolling over accounts from prior employer plans and rollover IRAs into the plan.
Missing Participant Searches. Even plans that have well established record-keeping and communication procedures likely will have missing or non-responsive participants and beneficiaries. When this occurs, the DOL suggests the following search strategies:
- attempting contact via email address, telephone and text numbers, and social media;
- checking related plan records and employer records for participant, beneficiary, and next of kin or emergency contact information;
- checking with designated beneficiaries and emergency contacts for updated information;
- using online search engines, public records, and social media;
- using a commercial locator service;
- sending a communication to the person's last known address via certified mail or a private delivery service with tracking features;
- Using death searches (e.g., obituaries, Social Security Death Index) and redirecting communications to beneficiaries;
- reaching out to the missing person's colleagues, other retirees, and union offices; and
- publishing missing participants on the plan sponsor's intranet and in employee communications, registering missing participants on registries (e.g., the National Registry of Unclaimed Retirement Benefits) and publicizing the registry in employee, retiree, and union communications.
If there are privacy concerns associated with one or more of these strategies, the plan may ask a party to forward a communication to the missing person instead of disclosing contact information.
Documentation. As with any good fiduciary practice, the procedures established by plan fiduciaries and actions taken should be documented by:
- written plan procedures to ensure clarity and consistency;
- a written record of key decisions and actions taken; and
- clear expectations for services performed by third-party administrators in service agreements, and regular review of their performance.
Although plan fiduciaries may delegate record-keeping, participant communication, and missing participant searches to third-party administrators, plan fiduciaries must ensure that the delegate has established and is following sound procedures. Plan fiduciaries are ultimately responsible for ensuring benefits are paid accurately and timely under the retirement plan.
The DOL recognizes that not all practices outlined in the Best Practices guidance are appropriate for every plan. Plan fiduciaries should adopt practices that (i) are appropriate for their plan participant populations and (ii) will produce the best results in a cost-effective manner. However, best practices should be used as part of the plan's fiduciary compliance strategies, not just as a fix when a problem arises (e.g., a plan is terminating and participants are missing). The use of best practices promotes efficient plan administration. In addition, by establishing good policies and procedures, following the procedures, and documenting the procedures and decisions made, plan fiduciaries ensure they are satisfying their obligations under ERISA to act prudently and for the exclusive benefit of plan participants and beneficiaries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.