DOL Investigating Defined Benefit Plans that Fail to Locate and Pay Benefits to Terminated Vested Participants

May 12, 2016

The Department of Labor (DOL) recently announced a new investigative initiative to assess whether defined benefit plans are locating and paying out benefits to terminated vested participants. The DOL believes that there are many plans that have vested participants who have attained the latest age for benefit commencement under the plan but have not started receiving benefits. While some plans simply do not have adequate procedures in place to determine that date, many plans do not provide benefits because they are unable to locate a recent address for the terminated participant. However, the failure to take steps to identify, locate and pay terminated vested participants could be considered a breach of  the fiduciary duty of prudence and/or loyalty which could potentially lead to personal liability for the trustees. To ensure that plans are in compliance, plan administrators should:

  • Ensure the plan has implemented (and follows) a policy for locating missing participants;

  • Take diligent efforts to locate missing plan participants;

  • Consult with any third-party administrators regarding their responsibilities under the  policy and procedures;

  • Keep records of all efforts to locate missing participants;

  • Monitor forfeitures - an increase in forfeitures could mean that there is a problem with the plan’s process and procedures for locating missing participants;

  • Take actions to reduce the occurrence of missing participants;

  • Periodically cross reference the addresses with a national database (e.g. social security death index); and

  • Make it easy for plan participants to notify you of addresses changes and frequently remind participants in various communications about the process of notifying you of an address change.

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