The Department of Labor’s Employee Benefits Security Administration recently issued best practice guidance to retirement plans regarding missing participants. A “missing participant” occurs when a participant is eligible for a distribution of benefits, but a plan administrator cannot make contact with a participant, a beneficiary cannot be located when a participant dies, or a participant simply does not respond to communications. ERISA requires that the plan administrator make reasonable efforts to find a missing or unresponsive participant, especially when tasked with making a mandatory distribution.
The recent guidance identifies a number of red flags that could indicate a plan is not fulfilling its duty to search for and find missing participants, including: more than a small number of missing or nonresponsive participants; more than a small number of terminated vested participants who have not started receiving their pension benefits despite reaching normal retirement age; incomplete contact information in plan records; and a lack of procedures for handling returned mail and uncashed checks.
The guidance further describes specific examples of best practices. For example, a plan should maintain accurate census information for the plan’s participant population. This includes contacting participants and beneficiaries on a periodic basis to confirm or update their contact information, following up on undelivered mail and uncashed checks, and including forms in mail or prompts online to confirm or change information. The guidance also suggests implementing effective communication strategies. For example, plans should use plain and prominent language on communications and should consider implementing informative onboarding and offboarding processes for participants. If a participant cannot be found, the guidance recommends checking with the employer or related plans (such as a group health plan); checking with relatives, beneficiaries, former coworkers, or emergency contacts; employing free or paid online searches; and using certified mail. Finally, plan sponsors should document procedures so there are clear and consistent practices and should record the actions taken to find missing participants.
It is likely that this will continue to be an ongoing enforcement priority for EBSA, so plan administrators should evaluate existing practices in light of these new published best practices.