New DOL guidance: When participants, beneficiaries go ‘missing’
Benefit plan sponsors need to be able to locate participants and beneficiaries for a number of things — notices, distributions, plan changes, etc. But what if you can’t find them?
The Department of Labor (DOL) has just issued new guidance — via Field Assistance Bulletin No. 2014-01 — that overrides old rules governing what to do when you can’t find retirement plan participants/beneficiaries, specifically in the wake of terminating a defined contribution plan.
Why issue new regs now? The feds have terminated two mechanisms plan sponsors and fiduciaries used in the past to try to track down “missing” participants: the Internal Revenue Service and Social Security Administration letter-forwarding services.
In the past, here’s what was required of fiduciaries to find “lost” participants:
- Mailing to the individual’s last-known address using certified mail, and
- Using an additional search method such as the letter-forwarding services, a commercial locator service, a credit reporting agency or Internet search tools.
The DOL says the new guidance “reflects important changes that have occurred in the ten years,” since the previous rules were issued.
New DOL requirements
Now, at a minimum, the DOL says that fiduciaries must take the following steps to locate a participant:
- Send a notice to the individual’s last-known address using certified mail
- Check related plan and employer records for a more current address
- Check with anyone the individual last designated as a beneficiary in an attempt to find updated contact info, and
- Make reasonable use of free Internet search tools, which include search engines, public record databases, obituaries and social media sites.
If all of the above fails, the DOL states that the fiduciary must consider if additional search steps are appropriate based on things like the cost of further search efforts and the size of the participant’s account balance.
Additional search steps may include using:
- Commercial locator services
- Credit reporting agencies
- Information brokers
- Investigative databases, and
- Analogous services that may charge fees.
If all “reasonable” efforts to track down a participant fails, then the DOL says fiduciaries of terminated defined contribution plans can select an appropriate distribution option to complete the plan’s termination. And once benefits are properly distributed, the missing individual’s status under the plan and the assets to which he or she would’ve been entitled are no longer covered by the Employee Retirement Income Security Act (ERISA).
Suggested administrative guidelines
Over at the Employee Benefits Legal Blog, employment law attorney Keith R. McMurdy of the firm Fox Rothschild LLP suggests employers consider taking things one step further by adding guidelines to benefit plans that address this very situation.
Example: McMurdy says plan sponsors and fiduciaries could insert language into a plan obligating the participant to provide the plan with current contact info with the understanding that the plan will rely on that info unless told otherwise.
This, however, will not excuse fiduciaries from having to take the steps the DOL outlined in the recent field bulletin to track down missing participants. It just provides extra protection in the event an individual can’t be found and distributions are made to complete a plan’s termination.
