Skip to main content
Article | Insider

DOL issues guidance on missing participants

Benefits Administration and Outsourcing|Health and Benefits|Retirement
N/A

By Gary Chase , William (Bill) Kalten , Drew Kusner , David Phillips and Laura Roos | April 6, 2021

The guidance aims to help retirement plans distribute benefits to missing and nonresponsive plan participants and beneficiaries.

The Department of Labor (DOL) recently issued Best Practices for Pension Plans, Compliance Assistance Release 2021-01 and Field Assistance Bulletin 2021-01 to help retirement plan fiduciaries locate and distribute benefits to missing and nonresponsive plan participants and beneficiaries (missing participants).

In recent years, the DOL has placed a heightened focus on fiduciary issues related to missing participants and in early 2016 started an enforcement effort focused on terminated vested participants in defined benefit (DB) plans; however, not much was known about the DOL's approach in these audits, the issues that most concerned the DOL or proactive steps that plan fiduciaries could take to address these issues.

The current guidance is intended to help plan fiduciaries meet their obligations under ERISA. The DOL had previously issued guidance regarding missing participants in 2014, but that guidance only applied to the termination of defined contribution (DC) plans. While the Best Practices for Pensions Plans (or Best Practices Memo) and Compliance Assistance Release 2021-01 are nonbinding guidance, they provide important insight into the DOL’s compliance expectations and suggest related process improvements to minimize audit risks and improve the administration of retirement plans.

Best Practices for Pension Plans

Red flags

The Best Practices Memo includes the following “red flags,” which are intended to help plans identify whether they potentially have a problem with missing participants (Willis Towers Watson observations are added where pertinent):

  1. More than a “small number” of missing or nonresponsive participants.

  2. Willis Towers Watson observation: During DB plan audits under the Terminated Vested Participants Project (TVPP), which is discussed in more detail below, DOL investigators have sometimes taken the position that plan administrators have a fiduciary duty to locate and pay every single participant. This new guidance’s allowance of a “small number” of missing participants suggests the DOL now acknowledges that for many plans, particularly large ones, locating every missing participant might not be possible; however, neither the Best Practices Memo nor TVPP documents define “small number.”


  3. More than a “small number” of terminated vested participants who have reached normal retirement age but have not commenced payment.

  4. Willis Towers Watson observation: Many plans allow a participant to defer payment beyond normal retirement age, and the existence of post-normal retirement age terminated vested participants in such plans would not necessarily be problematic (unless the participant has passed his or her required beginning date without having commenced payment). Plans with a material number of terminated vested participants who have not timely commenced payment — at normal retirement date or required beginning date, depending on plan terms — should take steps to locate such participants and start benefit payments.


  5. 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).
  6. Absence of sound policies and procedures for handling mail returned marked “return to sender,” “wrong address,” “addressee unknown” or otherwise, and undeliverable email.
  7. 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).

  8. Willis Towers Watson observation: This is a relatively new area of focus for this enforcement initiative, and it presents several challenges to plan sponsors, including: (1) trustee reports on uncashed checks to the plan sponsor can be difficult to access and research; (2) stale check purge services vary by trustee, with some trustees excluding this service from their core offerings; and (3) low success rate for finding participants to whom the uncashed checks are due and paying them out.


Best practices

The Best Practices Memo explains that plans demonstrate a commitment to minimizing the number of missing participants through the regular use of “best practices.” The Best Practices Memo identifies these best practices and groups them into four categories. The DOL acknowledges that not every practice is appropriate for every plan, so fiduciaries should review these best practices and decide which steps to take based on a plan's particular circumstances. The best practices are shown below and are not listed by priority or in any other particular order. (Willis Towers Watson observations are added where pertinent).

  1. 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 their contact information. Relevant contact information could include home and business addresses, telephone numbers (including cell phone numbers), social media contact information and next of kin/emergency contact information. Well-run plans regularly reconfirm that the information in their possession is accurate.
    • Including contact information change requests in plan communications along with a reminder to advise the plan of any changes in contact information.

    • Willis Towers Watson observation: Including reminders with other plan communications is a cost-effective option for requesting contact information updates. Similarly, although not identified as a best practice by the DOL, employers and plan administrators may want to confirm and update contact information whenever a participant or beneficiary contacts the employer or plan administrator.


    • Flagging undeliverable mail/email and uncashed checks for follow-up.
    • Maintaining and monitoring an online platform for the plan 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.
    • In the case of a change in record keepers or a business merger or acquisition by the plan sponsor, addressing the transfer of appropriate plan information (including participant and beneficiary contact information) and relevant employment records (e.g., next of kin information and emergency contacts). DOL has found that in the context of an acquisition, merger or divestiture, well-run plans make missing participant searches of plan, related plan (e.g., health plan) and employer records (e.g., payroll records) part of the collection and transfer of records.
  2. 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.
    • 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 and 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.
    • Communicating information about how the plan can help eligible employees consolidate accounts from prior employer plans or rollover IRAs.

    • Willis Towers Watson observation: Helping incoming participants remain connected to benefits received from their prior employers may help prior employers with their missing participant issues but does not help the current employer. It may also raise fiduciary investment advice issues, so this practice should not be implemented without careful consideration.


    • Clearly marking envelopes and correspondence with the original plan or sponsor name for participants who separated before the plan or sponsor name changed, for example, during a corporate merger, and indicating that the communication relates to pension benefit rights.
  3. Missing participant searches.
    • Checking related plan and employer records for participant, beneficiary and next of kin/emergency contact information. While the plan may not possess current contact information, it is possible that the employer’s payroll records or the records maintained by another of the employer’s plans, such as a group health plan, may have more up-to-date information. If there are privacy concerns, the person engaged in the search can request that the employer or other plan fiduciary forward a letter from the plan to the missing participant or beneficiary.
    • Checking with designated plan beneficiaries (e.g., spouse, children) and the employee’s emergency contacts (in the employer’s records) for updated contact information; if there are privacy concerns, asking the designated beneficiary or emergency contact to forward a letter to the missing participant or beneficiary.
    • Using free online search engines, public record databases (such as those for 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.

    • Willis Towers Watson observation: Some plan fiduciaries may not be comfortable using social media as a means of contacting former employees.


    • If participants are nonresponsive over a period of time, using death searches (e.g., Social Security Death Index) as a check and, to the extent such search confirms a participant’s death, redirecting communications to beneficiaries.
    • Reaching out to the colleagues of missing participants by, for example, contacting employees who worked in the same office (e.g., a small employer with one or two locations) or by 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. Similarly, for unionized employees, some have reached out to the union’s local offices and through union member communications to find missing retirees.

    • Willis Towers Watson observation: The usefulness of reaching out to colleagues or fellow retirees should be weighed against the time and administrative burden of doing so, the potential for fraudulent claims and any perceived violation of the participant’s privacy.


    • 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.

    • Willis Towers Watson observation: Although the DOL specifically notes the National Registry of Unclaimed Retirement Benefits as an example of a public registry that has privacy and cyber protections, it is not clear whether the DOL performed any diligence regarding the scope of these protections. It is also not clear whether the use of a pension registry is effective in locating missing participants.


    • Searching regularly using some or all of the above steps.

    • Willis Towers Watson observation: Unfortunately, the DOL did not provide guidance on when it would be appropriate to stop searching for a participant or beneficiary who cannot be located after multiple searches over multiple years.


  4. Documenting procedures and actions.
    • Reducing the plan’s policies and procedures to writing to ensure they are clear and result in consistent practices.

    • Willis Towers Watson observation: Documenting policies and procedures is an essential tool for ensuring that fiduciary responsibilities and compliance activities are performed correctly and timely. This is especially true for addressing missing and unresponsive participants and beneficiaries, where clearly defining the action steps and timing can clarify the process for addressing current issues and reducing its frequency in the future.


    • Documenting key decisions and the steps and actions taken to implement the policies.
    • For plans that use third-party record keepers to maintain plan records and handle participant communications, ensuring the record keeper is performing agreed upon services, and working with the record keeper to identify and correct shortcomings in the plan’s recordkeeping and communication practices, including establishing procedures for obtaining relevant information held by the employer.

Compliance Assistance Release 2021-01

Compliance Assistance Release 2021-01 outlines the general approach that DOL regional offices will use when conducting DB plan audits under the Terminated Vested Participants Project. The guidance describes how the DOL opens and conducts these TVPP audits, explains related records and document requests, identifies systemic errors and red flags that the DOL looks for during the audits, and summarizes how cases are closed.

Triggers for opening investigations

Investigators focus on DB plans that appear to have systemic issues with keeping track of terminated vested participants and beneficiaries; timely benefit distribution is the focus of the TVPP. Possible triggers for a TVPP audit include:

  • A Form 5500 reporting a large number of retired or terminated vested participants with unpaid benefits
  • A plan sponsor facing bankruptcy or involved in a merger or acquisition
  • Participants contacting the DOL regarding benefits they believe they are entitled to but have not been given the opportunity to claim

Information requested

The DOL generally will send a letter opening the audit and requesting the following documents and information:

  • Plan documents, relevant amendments and summary plan descriptions explaining the plan’s distribution rules and their compliance with ERISA
  • Participant census records
  • Actuarial reports
  • Plan procedures for communicating with terminated vested participants, spouses and other beneficiaries
  • Information that the DOL uses to determine if sufficient steps are taken to address missing participant situations, including (1) the plan's practices and procedures for handling missing participant situations, and (2) contracts and experiences with the plan's third-party recordkeepers (the DOL may supplement this information by interviewing relevant persons)

Additional information may be requested based on the responses to the initial request. The DOL will consider reasonable alternatives if the plan raises issues due to the cost, burden or privacy issues created by the DOL's request. The DOL will grant reasonable requests to extend a response date, but if responses are unduly delayed (or if necessary to obtain personal information), the DOL may subpoena the requested items.

Errors the DOL looks for

The DOL generally looks for the following to determine whether there are systemic issues in the plan’s administration of terminated vested participant benefits:

  • Systemic errors in plan recordkeeping and administration that create a risk of loss associated with the failure of a terminated vested participant, or his or her beneficiary, to enter pay status before death or the imposition of excise taxes on required minimum distribution (RMD) amounts
  • Inadequate procedures for identifying and locating missing participants
  • Inadequate procedures for contacting terminated vested participants (TVPs) nearing normal retirement age to inform them of their right to commence payment of their benefits
  • Inadequate procedures for contacting TVPs and the beneficiaries of deceased TVPs who are not in pay status at or near the date that they must commence RMDs to inform them of actions the plan will take and what they must do to enter pay status and avoid RMD excise taxes
  • Inadequate procedures for addressing uncashed distribution checks

The DOL also looks for items that are identified as "red flags" in the Best Practices Memo above.

Closing cases

Once the TVPP audit is completed, fiduciaries will be given time to respond to any issues found, then the DOL will discuss appropriate remedies for each alleged violation. The DOL will include the violations and approved corrective measures in a closing statement.

Field Assistance Bulletin 2021-01

In Field Assistance Bulletin No. 2021-01, the DOL issued a temporary enforcement policy regarding the use of the PBGC Missing Participant Program by terminating DC plans.

As background, the DOL had previously issued regulations establishing a fiduciary safe harbor under ERISA that protected fiduciaries of terminating DC plans if certain requirements are met, which included that benefits for missing participants are rolled over to an IRA or annuity, or in limited circumstances, the distribution be made to certain bank accounts or a state unclaimed property fund.

In 2017, the PBGC established the PBGC Defined Contribution Missing Participants Program to hold retirement benefits for missing participants in most terminated DC plans and to help those missing participants find and receive those benefits.

While the DOL's safe harbor does not apply to a transfer to the PBGC's program, Field Assistance Bulletin 2021-01 announces that the DOL will not pursue violations under ERISA if a missing participant's benefit is transferred to the PBGC program if (1) other requirements described in the Field Assistance Bulletin are met, and (2) the fiduciary acts in accordance with a good faith and reasonable interpretation of ERISA for any matter not addressed by the Field Assistance Bulletin; however, the DOL will continue to pursue a violation for failure to diligently search for missing participants prior to the transfer of benefits.

Finally, even if a plan elects not to transfer a benefit to the PBGC's program, the DOL encourages (but does not require) fiduciaries to notify the PBGC about missing participant benefits and how they are dealt with following a plan termination so that the PBGC may assist in the search for the missing participants.

Going forward

In light of this new guidance, plan sponsors should consider taking the following steps:

  1. Review current administrative procedures for locating missing participants and for ensuring the timely payment of benefits. Revise as necessary to reflect the recent guidance and best practices, as appropriate.
  2. Review terminated vested participant data for placeholders and missing data. Update if necessary and correct any data deficiencies. Going forward, records should be audited on a regular basis (e.g., annually) to ensure contact information is current.
  3. Include a request to update contact information with other plan communications. For example, a request could be included in the cover letter distributed with an Annual Funding Notice.
  4. Review plan documents and summary plan descriptions. These documents should indicate that participants are responsible for keeping their addresses updated, clearly describe the process for applying for benefits and any mandated benefit commencement dates (e.g., normal retirement date or date based on age 70½ or 72, as applicable), and specify how missing participants will be handled.
  5. Review and revise as necessary current procedures for handling uncashed checks.
  6. Search for any missing participants. Incorporate any steps added to existing procedures and document when these steps are taken.
  7. Correct late commencement of benefit distributions for any located participant. Regulators are acutely focused on missing participants, particularly those whose benefit should have commenced. Correcting late commencement failures before they are identified by a DOL or IRS auditor significantly reduces penalty exposure.
Authors

Director, Retirement and Executive Compensation

Senior Director, Retirement and Executive Compensation




Contact Us