Welcome Labor Department Guidance on Missing Participants

Welcome Labor Department Guidance on Missing Participants


By Jane Smith

Recently issued Department of Labor guidance is an important step toward resolving the “missing participants” problem.

Following several years of investigating how plans do, or do not, stay in touch with former employees who are due benefits, in January 2021, the Labor Department published a best practices guide for pension and retirement savings plans, “Best Practices for Pension Plans.” The new Labor Department guidance should help plan officials keep track of former employees who have earned retirement benefits.

In 2021, Labor Department investigations recovered $2.4 billion of benefit payments for 16,024 former employees of large companies who had not been informed of their rights to benefits at retirement age due to inaccurate contact information, poor recordkeeping and inadequate searches by their plans.

The Labor Department’s best practices are just common sense methods for keeping plan records up-to-date. They include monitoring the plan for indicators of problems, such as the number of former employees who have not claimed their benefits when due or the amount of returned mail and bounced e-mails for incorrect addresses. It is particularly important when records are transferred during changes in corporate structure or changes in record keepers, that plans verify employment information and contact information for participants and beneficiaries, and search for individuals who have not claimed their benefits at retirement age.

The Pension Rights Center and the regional pension counseling projects continually hear from retirees who are unable to locate their retirement plans. Congress is currently considering legislation that would create a lost plan registry that will help solve this problem for the future. The Labor Department’s best practices guide will complement that legislative initiative by encouraging companies to seek out former employees who are currently looking for their plans.

The guide notes that the best practices for searching for missing participants include checking related plan and employment records, checking with designated beneficiaries, using free internet search engines and public databases, sending certified mail, using a commercial locater service, checking with colleagues of the missing participant, and registering the missing participant on a pension registry. Many of these practices are included in the Labor Department’s Field Assistance Bulletin 2014-01.

The best practices guide also includes ways to communicate with former employees to ensure that they stay in touch with the plan. For example, plan notices should include regular reminders to participants to keep the plan informed of address or family changes. In recognition that former employees may not open a notice from an unknown company, the best practices include sending notices to former employees using the name of their former employer rather than the name of a new company. Additionally, plan communications should clearly and prominently state the reason for the communication.

In addition to the Best Practices for Pension Plans, the Labor Department issued a Compliance Assistance Release 2021-01 and a Field Assistance Bulletin 2021-01.  The compliance assistance release outlines the Labor Department’s investigative approach to determining whether plan officials are meeting their obligations to former employees who have earned retirement benefits under traditional pension plans. This includes reviewing plan records to determine whether procedures are adequate to maintain contact with participants and beneficiaries. Labor Department investigators may review routine plan communications, such as benefit statements, and procedures for contacting participants near normal retirement age. Procedures for searching for missing participants will also be reviewed.

The Field Assistance Bulletin sets forth a temporary enforcement policy for transfers of missing participant account balances of terminating defined contribution plans, such as 401(k)s. The policy permits transferring missing participant accounts to the Pension Benefit Guaranty Corporation  after a diligent search and encourages plan officials who do not transfer accounts to the PBGC to use the PBGC’s Expanded Missing Participants Program to list the missing participants and where their accounts can be found.

We are encouraged that the Labor Department is addressing missing participant issues and we are hopeful that plan officials will follow the Labor Department’s best practices for seeking out and staying in touch with their former employees.

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