One of the hottest topics among plan sponsors these days seems to be the issue of missing participants – more specifically, how far do you need to go? This week, we asked NAPA Net readers what they were hearing – and doing.
The IRS, Labor Department and PBGC have been closely monitoring how employers are dealing with missing participants and increasing their enforcement activity, and the DOL’s Field Assistance Bulletin (FAB) 2014-01, which is the agency’s primary guidance on procedures for dealing with missing participants, only addresses terminating DC plans, leaving sponsors unsure of whether the guidance applies to ongoing plans. Similarly, the PBGC recently expanded its missing participants program, but it only applied to terminated 401(k) plans, multiemployer pension plans and small professional service DB plans with 25 or fewer participants. More recently, the Government Accountability Office (GAO) has called on regulators to provide clarity on the issue. And bipartisan legislation has been introduced dealing with the subject.
So, is this an issue for plan sponsor clients of NAPA Net readers? For nearly a third (32%), the answer was “Yes!” Nine percent said it was an issue for most, but not all, of their clients, while another 27% noted that while it was an issue, it wasn’t a “big” one. Another quarter (23%) said it was an issue for some, but not all, of their clients, and the remainder fell into a category best characterized as they were the ones worried (or at least dealing with) about it, not their plan sponsor clients.
Most of this week’s respondents (68%) have been asked for help in tracking down missing participants, and another 23% say they have been asked for help by some plan sponsors. The rest hadn’t been asked for help… yet.
Respondents had deployed a number of means to help track down participants, including:
82% - Using free electronic search tools
73% - Using certified mail
64% - Checking related plan and employer records
36% - Checking with designated plan beneficiary
Other search alternatives included working with the recordkeeper, using private locator services and working with recordkeepers who utilize private locator services, and using Retirement Clearing House.
As for what had been most successful, the clear winner was the use of free electronic search tools, cited by 41%. Roughly 1 in 10 referenced certified mail, while about 5% each cited checking related plan and employer records, and checking with the designated plan beneficiary. The services of Millennium Trust and Retirement Clearing House were both noted specifically, and the use of a paid professional search was also cited.
As for comments – well, we got a number. Here’s a sampling:
"It’s super frustrating and has been ever since they did away with the IRS letter forwarding service. An entire business could be made out of tracking people down for this purpose that doesn't involve buying skeezy background checks from the internet."
"Retirement Clearing House is a program sponsors use at no cost to help force out terminated employees. Their process locates the most recent addresses and can be used by the Employer to satisfy the requirement in finding them."
"I went to a recent presentation at a meeting of the Employee Benefits Committee of the Chicago Bar Association by a high level person in the DOL Chicago Office in which he made it quite clear that finding missing participants is one of the major focus areas for the DOL at this time. To me it is a no brainer. Employers have to make a major effort to find missing participants and keep track of them. If you do not when they reach age 65 they will be notified by Social Security that they have a retirement benefit and then these people will contact their former employer. If the employer has no record on this person it can take a lot of research work to determine if this person is in fact entitled to a benefit or was paid out years earlier. It is a matter of the employer either spending a fairly small amount of time now as opposed to a lot more time later."
"If the account balance is large enough to support it (and pay the fee), we use a search service that has access to more electronic information than we do. It’s not 100%, but we do find someone that way more often than not. Also, finding lost beneficiaries is often many times harder than finding lost participants. We have added beneficiary address and phone number information to the forms we provide our clients, but the participants often name beneficiaries online and don’t use those paper forms."
"Definitely need guidance from DOL on acceptable methods for attempting to locate and more importantly, what is permitted if someone is lost, how do we dispose of their account balance."
"There is a great deal of variability in the ability of recordkeepers to locate participants; so are extremely good at it; others, not so much. It is also important to work on these issues before participants become missing by timely and properly cashing out small account balances, making certain that an emphasis on address updating for benefits is an important component of the exist interview process, etc."
"With the IRS letter forwarding program being a thing of the past, we end up using a professional search service more often. Fortunately, the autorollover company for our clients also offers a reasonably priced and effective search service. Our clients are more concerned with keeping the participant count down to reduce fees and avoid creeping up to audit size than they are about possible government monitoring."
"It’s frustrating as we really haven't been successful in finding lost participants. We are thinking of amending all of our plans to force out any amount under $5,000 to a rollover. Currently we use $1,000 as our rollover minimum but then we end up dealing with uncashed checks for the under $1,000 group. The worse ones are those with over $5,000 that forget to change their address/email for the quarterly statements. How can you forget that money?"
"For documentation purposes, we try to make providing future contact information part of the exit interview checklist if possible."
"Time for a national database for DC plans!"
"Plan sponsors are unsure of how often they should exercise their plan’s force-out provisions."
That said, this week’s Editor’s Choice goes to the reader who noted, “I would like to suggest that a large part of the enrollment process should be dedicated to the importance of not becoming a missing participant.”
Thanks to everyone who participated in this – and every week’s – NAPA Net Reader Poll!
See also “‘Missing’ Inaction” at https://www.napa-net.org/news/managing-a-practice/regulatory-compliance/missing-inaction/.