Missing Plan Participants Concerns the Regulators
Missing plan participants is a top priority at the Department of Labor (DOL). The Department of Labor is cracking down on employers’ efforts – or lack-thereof – to find and contact missing plan participants. The DOL’s ultimate goal is to have zero missing plan participants. In fact, regulators’ audits are more focused than ever on missing participants and ways to find them.
Zero missing plan participants is a lofty goal, to be sure. The DOL aims to encourage employers to make certain participants do not become missing plan participants in the first place. As the workforce becomes increasingly mobile and as older employees retire in droves, plan sponsors are having trouble keeping participant data current. No matter how disciplined the process, it is still a challenge for sponsors to keep tabs on active participant data such as name, mailing address, e-mail addresses, and telephone numbers.
Terry Dunne, Senior Vice President and Managing Director of Retirement Services at custodian Millennium Trust, recently penned an article on the topic of missing plan participants for 401kSpecialist. The process of maintaining good participant data includes:
- Identifying multiple points of contact,
- Updating retirement plan participant and beneficiary addresses,
- Identifying missing and unresponsive participants,
- Developing and maintaining internal and external participant search processes, and
- Creating a method for managing the accounts of missing plan participants.
Plan sponsors should work in tandem with recordkeepers and administrators to share up-to-date participant information and identify and search for missing plan participants. There is added complexity when it comes to managing the data for retired and inactive participants. In fact, many plan sponsors don’t even know former participants’ data is outdated until they receive a returned distribution check for a required minimum distribution (RMD).
Managing and maintaining participant data has become increasingly complex as defined contribution (DC) plans have become the primary way to save for retirement for the majority of employees. In 2017, the IRS cautioned DOL auditors not to challenge retirement plans that already had in place robust search processes for missing plan participants. At that time, the IRS outlined steps plan sponsors could take to locate missing participants or their beneficiaries, including:
- Checking the records of related plans and employers for additional contact information,
- Sending notices by certified mail to participants’ last known mailing addresses,
- Sending notices to e-mail addresses, as well as texting or calling telephone numbers,
- Contacting participants’ designated plan beneficiaries for updated information,
- Using free electronic search tools, including Internet searches and public record data sites, and
- Using a third party or a proprietary Internet search tool to locate missing participants.
However, auditors have begun to scrutinize plan sponsors’ missing plan participants and plan search processes in recent years. Thus, in preparation for audits, sponsors have taken one of two paths: working with plan providers to develop, document and implement search processes, or outsourced those functions to firms like Millennium Trust, which specialize in reuniting missing plan participants and their beneficiaries with retirement savings.
In addition, plan sponsors are also adopting automatic rollover provisions — the DOL’s preferred choice for missing plan participants in terminating plans.
Automatic rollover IRAs provide advantages for plan sponsors, too. They can help sponsors fulfill their fiduciary duties when it comes to uncashed check balances. All a plan sponsor has to do to meet their fiduciary obligation is transfer participant assets out of the plan and into a qualifying IRA. The sponsor isn’t required to monitor the IRA provider, nor do they have any responsibility for the IRA provider’s compliance.
Keeping track of missing plan participants’ data in the face of regulatory audits can seem like a daunting task. Utilizing opportunities like Automatic Rollover IRAs can help both to increase participants’ retirement readiness and ensure plan sponsors meet their fiduciary responsibilities. In addition, according to Mr. Dunne, “keeping better track of participant data and reuniting missing plan participants and their beneficiaries with retirement assets they’ve left behind can help improve retirement security for all Americans.”