Missing and Nonresponsive Participants

In Part One of this series, we discussed recent guidance issued by the U.S. Department of Labor (“DOL”) about handling missing and nonresponsive participants. In this article, we will provide a summary of the steps that plan administrators should follow when dealing with missing or nonresponsive participants. Since plan administrators have a fiduciary duty to ensure that benefits are paid to the correct participants, a procedure related to locating missing and nonresponsive participants is essential.

A. 2014 Guidance

The Employee Retirement Income Security Act of 1974 (“ERISA”) and other legal guidance provide a series of steps that a plan fiduciary must take when the fiduciary realizes that the plan has missing or nonresponsive participants. DOL guidance issued in 2014 provides information about locating missing participants. Specifically, a plan sponsor must conduct a “facts and circumstances analysis” and should consider the size of the plan, the participant’s account balance, the expenses involved in further research efforts, and any additional options the plan may have for locating the missing participants. Reasonable expenses may be charged to a participant’s account, but the allocation of those expenses must be consistent with the terms of the plan.

The 2014 DOL guidance states that a plan fiduciary cannot distribute a missing participant’s benefits unless a variety of location attempts are made. The 2014 guidance requires a plan to use certified mail, check related plan and employer records, check with the designated plan beneficiary, and use free electronic search tools to locate a missing or nonresponsive participant. If none of these methods is successful, the plan can determine the appropriate distribution method.

B. 2021 Guidance

In January 2021, the DOL issued further guidance that provides a list of appropriate searching techniques for locating missing or nonresponsive plan participants. Appropriate searching techniques include the following:

1. Checking related plans in employer records for the participant’s information;
2. Checking with designated plan beneficiaries for additional participant information;
3. Using free online search tools, public record databases, obituaries, and social media;
4. Using a commercial locator service, a credit reporting agency, or a proprietary internet search tool;
5. Attempting contact via United States Postal Service, certified mail, or private delivery;
6. Attempting contact via alternative methods such as e-mail, phone and text numbers, or social media;
7. Conducting death searches if the participant is unresponsive for a long period of time;
8. Reaching out to colleagues of the missing participant by, for example, contacting employees who worked in the same office or publishing a list of missing participants on the company’s intranet;
9. Registering missing participants on public and private pension registries with privacy and cyber security protections; and
10. Searching regularly with all or some of the above steps.

If a participant cannot be located after the above steps are completed, the plan fiduciary should consider its options for distributing the participant’s plan assets. Such options may include a rollover into an individual retirement account (which is the preferred option), establishing an interest-bearing, federally insured bank account in the name of the missing participant, or depositing the participant’s account balance into the Pension Benefit Guaranty Corporation’s (“PBGC”) Defined Contribution Missing Participant Program. This last option was recently approved as a distribution method by the DOL in its Field Assistance Bulletin No. 2021-01. The Missing Participant Program is meant for holding retirement benefits for missing participants when a defined contribution plan is terminated.

As a reminder, the steps taken to locate missing or nonresponsive participants should be determined by the plan fiduciary on a case-by-case basis. There are a whole host of factors that the plan fiduciary must consider when making a decision about the steps to take to ensure that the plan participant receives his or her benefit.

If you would like assistance with handling missing or nonresponsive participants under a retirement plan, please contact one of the authors of this article.

Authors:

Mindi M. Johnson...616.726.2252...mjohnson@fosterswift.com
Julie L. Hamlet...616.796.2515...jhamlet@fosterswift.com
Amanda J. Dernovshek...517.371.8259...adernovshek@fosterswift.com