The Pension Benefit Guaranty Corporation (PBGC) was the first federal agency to administer a program to hold retirement benefits for missing participants and beneficiaries in terminated retirement plans. The PBGC Missing Participants Program aims to help these participants and beneficiaries find and receive the benefits from terminated retirement plans. Under the SECURE 2.0 Act, a national searchable lost and found database will be created by the Department of Labor (DOL), enabling all former employees who may have lost track of their retirement benefits to search the contact information of their retirement plan administrator. 

Follow updated guidance

The issue of missing participants has been a focus of the DOL for several years, and they have worked in conjunction with the Employee Benefits Security Administration (EBSA) to audit retirement plans and reinforce the actions that employers must take to locate lost participants and pay the benefits to which they are entitled.

The DOL and EBSA have issued detailed guidance regarding missing participants, including the steps employers should take to locate such participants:

Missing Participants – Best Practices for Pension Plans: Provides an extensive list of best practices employers could adopt to minimize missing or nonresponsive participants. It also highlights “red flags” that signify a missing participant problem.

Compliance Assistance Release No. 2021-01: Outlines investigative processes and case-closing practices EBSA uses to conduct Terminated Vested Participants Project (TVPP) audits of defined benefit plans.

Field Assistance Bulletin No. 2021-01: Authorizes plan fiduciaries of terminated defined contribution plans, such as 401(k) plans and 403(b) plans, to transfer account balances of missing or non-responsive participants to the PBGC Missing Participants Program.

Best practices to reduce missing participants

To mitigate the problem of missing participants, EBSA shared examples of best practices that have been proven to reduce instances of missing or non-responsive participants. These are a few of the agency’s suggestions:

• Maintain accurate census information for the plan’s participant population. Reach out to participants, both current and retired, and beneficiaries periodically to confirm or update their contact information. Relevant contact information could include email, home and business addresses, telephone numbers (including cell phone), social media accounts and emergency contacts.
• Implement effective communication strategies. State upfront and prominently what the communication is about – e.g., eligibility to start payment of pension benefits, a request for updated contact information, etc.
• Conduct missing participant searches. Check with designated plan beneficiaries and the employee’s emergency contacts (in the employer’s records) for updated contact information.
• Document procedures and actions. Document key decisions and the steps and actions taken to implement the policies.

Are your efforts to find missing retirement plan participants among the best practices recommended by EBSA and the DOL? Employers can leverage the aforementioned documents and guidance to establish an appropriate process for locating missing participants and remain compliant with requirements to maintain accurate records.

These searches make sense

Aside from the DOL and EBSA’s focus, missing participants can cause administrative burdens, increased plan costs and fiduciary risk for the organization. Here are a number of practical reasons employers should address participant accounts:

• There are large amounts of money at stake. Each year, hundreds of millions of dollars are recovered for terminated, vested participants in retirement plans.
• Missing participants inhibit the ability to make timely required minimum distributions (RMDs), which may result in penalties to the employer and participant.
• Missing participants inhibit the ability to distribute death benefits to beneficiaries. This is another important reason to maintain up-to-date beneficiary election data.
• Missing participants may delay plan terminations, requiring another year of audit and governmental filings.

EBSA’s FY22 report highlighted these enforcement actions between October 1, 2021, and September 30, 2022:

907	6,928	$542M
civil investigations	terminated vested participants in DB plans	benefits collected that were owed to them