Knock Knock, Is Anyone Home? Do You Know Where Your “Missing” Retirement Plan Participants Are?
Black mailbox stuffed full of mail

In the laundry list of retirement plan administrative and operational requirements, plan sponsors may sometimes overlook their obligations with respect to terminated vested employees. Even though these individuals have left the company, the plan sponsor still retains fiduciary obligations to them.  In order to provide them their benefits under the plan, you will need to maintain contact information for them.

In addition, terminated vested participants should receive many of the annual notices that must be sent out by the plan. See our recent blog.

If you maintain a pension plan, you will need to advise them of their eligibility to apply for benefits as they near normal retirement age and the date they must start required minimum distributions (RMDs) under federal tax law. Similarly, for 401(k) plans, terminated vested participants who leave their money in the plan will also need to be notified of RMD requirements.

These obligations still remain even if the participant is “missing” either because they never provided adequate contact information, it changed over time without them updating the plan sponsor or they are simply unresponsive to plan communications.

One method a plan sponsor is permitted to use to deal with terminated (and possibly missing) participants’ small plan balances is to roll them into an IRA in the participant’s name. The maximum participant plan balance that a plan sponsor can force out of a plan was increased by SECURE 2.0 to $7,000. See our recent blog. SECURE 2.0 also approved automatic portability generally so that a 401(k) plan sponsor could also automatically move a participant’s small account to a new employer’s plan when a participant changes jobs. One or two companies are now providing auto-portability services by establishing a network of recordkeepers that participate in the program to facilitate the rollover process for these small accounts.  The DOL recently issued a proposed class exemption that should support their efforts and facilitate more options in the future.

In its “Missing Participants – Best Practices for Pension Plans”, the DOL provided the following suggestions for minimizing missing participants in a plan:

  • Contact participants, both current and retired, and beneficiaries on a periodic basis to confirm or update their contact information.
  • Include contact information change requests in plan communications along with a reminder to advise the plan of any changes in contact information.
  • Flag undeliverable mail/email and uncashed checks for follow-up.
  • Maintain an online platform for the plan that participants can use to update contact information.
  • Provide prompts for participants and beneficiaries to confirm contact information upon login to online platforms.
  • Build 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 and to correctly calculate the amount of benefits owed, and advise employees of the importance of ensuring that the plan has accurate contact information at all times.

If you have reason to believe a participant is missing or they are unresponsive, here are additional steps you should consider:

  • Check related plan and employer records for participant, beneficiary and next of kin/emergency contact information.
  • Check with designated plan beneficiaries and the employee’s emergency contacts for updated contact information.
  • Use free online search engines, public record databases, obituaries, and social media to locate individuals.
  • Use a commercial locator service, a credit-reporting agency, or a proprietary internet search tool to locate individuals.
  • Attempt contact via United States Postal Service (USPS) certified mail or private delivery service to the last known mailing address.
  • Reach out to the colleagues of missing participants by, for example, contacting employees who worked in the same office or by publishing a list of “missing” participants on the company’s intranet.
  • Register missing participants on public and private pension registries with privacy and cyber security protections (e.g., National Registry of Unclaimed Retirement Benefits).

Staying in contact with plan participants and beneficiaries is an important part of maintaining a compliant plan. Don’t let one or two “missing” participants snowball into dozens or more. If you want to discuss any concerns you may have with your participant census information or how you handle terminated vested participants, please reach out to any of the attorneys in our Employee Benefits group

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