The U.S. Department of Labor (DOL)’s guidance for locating missing participants in the event of a plan termination has become more widely accepted for finding such participants in a variety of scenarios. But the guidance does not clearly state at what point the retirement plan fiduciary has met its obligation to track down missing participants who are due a benefit. (See ¶281 in The 401(k) Plan Handbook for more information.)
Written requests have been submitted to the DOL on behalf of plan sponsors, asking for additional clarification that spells out when a plan administrator has satisfied its fiduciary duty as it relates to finding missing participants. The agency is silent on situations when the participant is found. However, when the search fails, the DOL may allege that the plan fiduciary failed to conduct an appropriate search and therefore breached its duty under the Employee Retirement Income Security Act (ERISA).
While the retirement plans community awaits requested guidance on sufficient missing-participant searches, this column will offer a few best-practice tips.
Background
The DOL issued guidance on finding missing participants in Field Assistance Bulletins (FABs) No. 2004-02 and 2014-01, both titled “Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans.” The guidance there outlines required search steps, additional actions that should be considered, standard and alternative distribution options, and unacceptable distribution options. This guidance is designed to help plan administrators along the path to distributing plan assets ahead of plan termination.
| Best Practice
Use Facebook, Whitepages.com, and Google.com to locate a missing participant. |
When a plan administrator realizes that a participant is missing, the following steps must be taken:
- Use certified mail to send a notice to the participant’s last known address.
- Check related plan and employer records for an updated address for the participant. Contact the designated plan beneficiary, who is customarily a family member of the missing participant and may be able to provide updated contact information.
- Use free electronic search tools, including internet search engines, public records databases, social media sites, and obituaries.
Due to Health Insurance Portability and Accountability Act (HIPAA) privacy concerns, the request for missing participant or beneficiary information from related health plans may be handled in the form of a letter-forwarding approach. Should current contact information be available from the same plan sponsor’s healthcare plan, the plan administrator may forward a letter request to the participant using that address, rather than violate HIPAA’s prohibition on disclosing protected health information to non-health benefit plans.
Use Available Resources
| Best Practice
When searching social media sites, it may be necessary to follow the trail to the missing participant’s family and friends, known affinity groups or professional organizations, as well as any book, sporting, and retirement clubs the missing participant may have connected with. |
Without stunting creativity, it is important to establish procedures for advancing the search for a missing participant using information obtained from social media. Though it may not be appropriate to make an appearance at the next meeting of the participant’s coin-collecting club, for example, it seems acceptable to reach out to the club president for updated contact information for a missing participant.
Similarly, check public records that can uncover an updated address, telephone number, employer, automobile registration, or license number: All of these can narrow down the potential location of the missing participant.
| Best Practice
Work with the company’s legal department to subscribe to a robust public records database to assist in finding missing participants, their family members, and friends. Such lists may include telephone numbers. |
If, after following these steps, the plan fiduciary still has not located the missing participant owed a benefit distribution, the DOL advises that the fiduciary should consider whether additional search steps are appropriate. This implies that a facts-and-circumstances determination should be made based on factors such as the size of the participant’s account balance, the cost of further search efforts, and whether the available information opens any leads to the missing participant.
When the initial search fails to locate the missing participant, secondary searches include, but are not limited to, Internet search tools, commercial locator services, credit reporting agencies, information brokers, investigation databases, and related services, regardless of whether there is a fee involved.
| Best Practice
Piggyback on the investigative tools and contracted resources already established by the company’s security team and fraud department. |
In part two of this article we are going to look at acceptable and unacceptable alternatives.
 Arris Reddick Murphy is an attorney with experience in the employee benefits and executive compensation practice area, and she is senior counsel with FedEx Corp.’s Tax & Employee Benefits Law group. Before joining FedEx, she held the position of associate with the law firm of Potter Anderson & Corroon, LLP, and worked in-house with The Vanguard Group and the City of Philadelphia as counsel to its Board of Pensions and Retirement. She is contributing editor of The 401(k) Handbook. |