The U.S. Department of Labor (DOL) has issued guidance on best practices for locating missing participants in defined benefit and defined contribution retirement plans. While the guidance does not provide a safe harbor, and may be subject to further review by the Biden Administration, plan sponsors should review the guidance and implement compliant best practices that fit their plans.

Background and Red Flags

Following a nationwide compliance initiative, plan sponsors who have undergone recent DOL audits know that the agency is emphasizing locating missing participants and ensuring they remain apprised of their plan benefits. Recent audits have focused almost exclusively on practices and procedures for locating missing and nonresponsive participants and beneficiaries, causing employer frustration because of the lack of DOL guidance.

DOL explains that the following are red flags, indicating plans may have a problem:

  • More than a small number of missing or nonresponsive participants.
  • More than a small number of terminated vested participants who have reached normal retirement age but have not started receiving pension benefits.
  • Missing, inaccurate, or incomplete contact information, census data, or both (e.g., incorrect or out-of-date mail, email, and other contact information, partial social security numbers, missing birthdates, missing spousal information, or placeholder entries).
  • Absence of sound policies and procedures for handling mail returned marked "return to sender," "wrong address," "addressee unknown," or otherwise, and undeliverable email.
  • Absence of sound policies and procedures for handling uncashed checks (as reflected for example, by the absence of an accounting journal or similar record of uncashed checks, a substantial number of stale uncashed distribution checks, or failure to reclaim stale uncashed check funds in distribution accounts).

DOL Best Practices for Locating Missing Benefit Plan Participants

Locating missing participants is a fiduciary obligation. DOL indicates that a common characteristic of plans with low numbers of missing and nonresponsive participants is staff committed to ensuring plan records are complete and up to date, and proactively ensuring participants and beneficiaries timely receive their benefits.

DOL explains that plan fiduciaries should undertake a cost-benefit analysis in choosing suitable processes, and consider the size of a participant's accrued benefit and account balance. There is no one-size-fits-all answer, and it ends up being a facts and circumstances test (the implication being what you do to locate one participant might need to be more extensive compared to another).

DOL lists the following as examples of practices used by well-run plans. The list is long, but DOL acknowledges not every item will be suitable for all plans. The clear message is that all plan sponsors should implement robust procedures to locate missing and nonresponsive participants.

However, before blindly implementing these examples, plan fiduciaries must consider what works for their participants and address security concerns raised by some suggestions, especially with the rise in retirement plan identity theft.

Maintaining Accurate Census Information for the Plan's Participant Population

  • ☐ Contacting participants, both current and retired, and beneficiaries on a periodic basis, to confirm or update contact information, and regularly reconfirming accuracy.
  • ☐ Including contact information change requests in plan communications along with a reminder to advise the plan of any changes in contact information.
  • ☐ Flagging undeliverable mail/email and uncashed checks for follow-up.
  • ☐ Maintaining and monitoring an online plan platform that participants can use to update contact information for themselves and their spouses/beneficiaries, if any, and incorporating such updates into the plan's census information.
  • ☐ Providing prompts for participants and beneficiaries to confirm contact information upon login to online platforms.
  • ☐ Regularly requesting updates to contact information for beneficiaries, if any.
  • ☐ Regularly auditing census information and correcting data errors.
  • ☐ If recordkeepers are changed or there is a merger or acquisition, addressing the transfer of appropriate plan information (e.g., participant and beneficiary contact information) and relevant employment records (e.g., next of kin information and emergency contacts).

Implementing Effective Communication Strategies

  • ☐ Using plain language and offering non-English language assistance when and where appropriate.
  • ☐ Stating upfront and prominently what the communication is about – e.g., eligibility to start payment of pension benefits, a request for updated contact information, etc.
  • ☐ Encouraging contact through plan/plan sponsor websites and toll free numbers.
  • ☐ Building steps into the employer and plan onboarding and enrollment processes for new employees, and exit processes for separating or retiring employees, to confirm or update contact information, confirm information needed to determine when benefits are due, to correctly calculate the amount of benefits owed, and to advise employees of the importance of ensuring the plan has accurate contact information at all times.
  • ☐ Communicating information about how the plan can help eligible employees consolidate accounts from prior employer plans or rollover IRAs.
  • ☐ If the plan sponsor or plan names have changed, clearly marking envelopes and correspondence with the original plan or sponsor name for participants who separated before the plan or sponsor name changed, and indicating that the communication relates to pension benefit rights.

Missing Participant Searches

  • ☐ Checking related plan and employer records (e.g., payroll or group health plan information) for participant, beneficiary, and next of kin/emergency contact information.
  • ☐ Checking with designated plan beneficiaries (e.g., spouse, children) and the employee's emergency contacts (in the employer's records) for updated contact information.
  • ☐ Using free online search engines, public record databases (e.g., licenses, mortgages, and real estate taxes), obituaries, and social media to locate individuals.
  • ☐ Using a commercial locator service, a credit-reporting agency, or a proprietary internet search tool to locate individuals.
  • ☐ Attempting contact via United States Postal Service (USPS) certified mail, or private delivery service with similar tracking features if less expensive than USPS certified mail, to the last known mailing address.
  • ☐ Attempting contact via other available means such as email addresses, telephone and text numbers, and social media.
  • ☐ If participants are nonresponsive over a period of time, using death searches (e.g., the Social Security Death Index) and, to the extent such search confirms a participant's death, redirecting communications to beneficiaries.
  • ☐ Reaching out to the colleagues of missing participants, e.g., contacting employees who worked in the same office, or publishing a list of "missing" participants on the company's intranet, in email notices to existing employees, or in communications with other retirees who are already receiving benefits. For union employees, contacting the union's local offices and using union member communications.
  • ☐ Registering missing participants on public and private pension registries with privacy and cyber security protections (e.g., National Registry of Unclaimed Retirement Benefits), and publicizing the registry through emails, newsletters, and other communications to existing employees, union members, and retirees. Plan sponsors should be cautious in utilizing this option because of plan security risks.
  • ☐ Searching regularly using some or all of the above steps.

Documenting Procedures and Actions

  • ☐ Having a written policy for locating plan participants.
  • ☐ Documenting key decisions and steps and actions taken to implement the policies.
  • ☐ Ensuring third party recordkeepers are performing agreed services, and working with recordkeepers to identify and correct shortcomings.

In summary, as part of their duties to participants and beneficiaries, all plan fiduciaries must have robust procedures in place to locate missing and nonresponsive individuals. Contact your DWT attorney for more information.