Under the Employee Retirement Income Security Act of 1974 (“ERISA”) multiemployer retirement plan fiduciaries must make reasonable efforts – under the duties of prudence and loyalty – to locate missing participants entitled to benefits from Defined Benefit (“DB”) and Defined Contribution (“DC”) retirement plans. Multiemployer plans often face challenges due to increased participant mobility. To assist plan fiduciaries in meeting their obligations, the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”) has provided guidance through both enforcement and suggested “best practices.”
In 2021, the DOL released non-binding guidance titled “Missing Participants – Best Practices for Pension Plans.” The guidance begins by identifying several “red flags,” such as having deficient participant contact information, failing to create procedures for handling undeliverable mail or uncashed checks, or having an atypical number of missing, nonresponsive or terminated vested participants (“TVPs”) that have not begun receiving their benefits.
To address these concerns, the DOL guidance encourages plans to select effective, cost-efficient practices and preventative measures that are based on the plan’s circumstances and the participant’s account size. The guidance then proceeds by outlining suggested steps when searching for missing or non-responsive participants, such as:
- Reviewing plan, employer, and related plan records to update contact details.
- When privacy rules prohibit direct outreach, asking other plan fiduciaries, employers, or beneficiaries to forward a letter to participants, asking them to contact the plan.
- Using free tools including search engines, public records databases, obituaries, and social media; and for larger accounts, commercial locator services, credit reporting agencies or proprietary search tools may be appropriate.
- Sending certified mail to the last known address, as well as attempting contact via email, phone, text, and social media.
- Running death searches to confirm participant status and locate beneficiaries when necessary.
- While remaining cautious of privacy concerns, plans may share the names of missing participants internally – for example, on the plan’s intranet, sending notices to retirees, unions, including notices in emails to employees, or register missing participants on public or private cyber secure pension registries such as, the National Registry of Unclaimed Retirement Benefits.
The DOL notes that plans should clearly document the entire process, including policies, procedures, and key decisions. If a plan is using a third-party recordkeeper, plan fiduciaries must ensure the recordkeeper properly follows the same approach. Plan fiduciaries are recommended to address any gaps in the recordkeeper’s services.
The SECURE 2.0 Act of 2022 created a requirement that plan sponsors must annually submit information to the DOL beginning in 2024 to the Retirement Savings Lost and Found (“RSLF”) online database. The information to be submitted includes names, taxpayer identification numbers, and the nature, amount, and form of payment of the deferred benefits. This database helps participants find their retirement savings accounts and contact plan administrators. While Plan sponsors are not permitted to directly use the RSLF database to find missing participants, the DOL can search for and contact plan administrators if missing participants are located.
For terminating DC retirement plans, the DOL’s Field Assistance Bulletin No. 2014-011 outlines minimum search steps fiduciaries must take to locate missing participants. Requirements include certified mail notices and a review of plan, employer, and related records (such as Union Hall records). In addition, plan fiduciaries must reasonably use free internet search tools and can request the participant’s last known employer, another plan fiduciary, or a designated beneficiary forward a letter to the missing participant or beneficiary. If these steps fail, the plan fiduciary must evaluate whether further steps, like commercial locator services, are justified considering account size, and cost.
Similarly, the IRS urges proactive efforts for missing participants and TVPs when benefits are not timely claimed. The IRS advises that plan administrators should search the records and directories of the plan, plan sponsor, any related plans, and other publicly available sources for alternative contact information. Further they should use commercial locator services, credit reporting agencies, or proprietary internet search tools to locate individuals, and attempt contact by certified mail to the last known mailing address, email address, and telephone number.
Ultimately, ERISA places an affirmative duty on fiduciaries to make a “reasonable effort” to locate missing participants. Those concerns aren’t new. However, by eliminating access to the Social Security Death Master file, plans must take a multi-prong approach to fulfill this requirement. Plan fiduciaries. The DOL and IRS have created clear guidance on actions that plan fiduciaries must take and the “best practices” they should consider implementing to search for missing participants and beneficiaries.