The U.S. Department of Labor on Aug. 14 issued a new set of guidance for plan sponsors about tracking missing defined contribution retirement plan participants and distributing their assets. It takes into account vastly improved Internet search capabilities that have emerged in the decade since its last instructions about obligations to missing participants.
Field Assistance Bulletin 2014-1 defines how fiduciaries of terminated DC plans can fulfill their obligations under ERISA to find missing participants and distribute their account balances. DOL said the new guidance replaces FAB 2004-02, and “reflects important changes that have occurred in the ten years” since that document’s publication.
The new FAB removes a requirement to use IRS and Social Security Administration letter-forwarding services that were ended in recent years. Instead, DOL said, expanded, free electronic search tools are to be used. Improved Internet search technologies also have led DOL to codify its enforcement safe harbor for distributing missing participant benefits, the agency said.
The new FAB also reflects some suggestions from the 2013 ERISA Advisory Council, which focused last year on the topic of locating missing participants, DOL said.
Under ERISA, fiduciaries are required, in the case of plan terminations, to ensure the distribution of unallocated funds to participants. ERISA also governs the steps taken to implement the “settlor” decision to terminate a plan, including actions taken to locate missing participants. A plan fiduciary’s choice of a distribution option for a missing participant’s account balance is a fiduciary decision, however, and is also subject to ERISA. As the new FAB reminds, plan sponsors must make reasonable efforts to locate missing participants or beneficiaries so that they can implement their directions on plan distributions to them. A plan fiduciary may charge the missing participants’ accounts “reasonable expenses” for their efforts to find them.
The FAB outlines search steps expected of fiduciaries of terminated plans after routine methods, such as first-class mail or electronic notification, fail to find the participant. It cautions that more expensive approaches may be required when the account balance is large enough to justify additional plan cost and other efforts haven’t located the participant, although the threshold for a “large” balance is not specified.
The new FAB also gave a range of distribution options from terminated DC plans, including some to use if an individual retirement plan provider can’t be found to accept a direct rollover for a missing participant. The bulletin stressed that 100-percent income tax withholding is not a choice for dealing with missing participants’ benefits.
Questions about the new FAB on locating missing participants may be directed to the DOL Division of Fiduciary Interpretations, Office of Regulations and Interpretations, reachable by phone at (202) 693-8510.
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