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What’s a Plan Sponsor to Do About Missing Participants?

Given the recent attention and lack of formal guidance addressing missing participants for ongoing DC plans, there are increasing calls for the government to formally address how far plan sponsors need to go to find missing participants.

Noting that the IRS, Labor Department and PBGC have been closely monitoring how employers are dealing with missing participants and increasing their enforcement activity, a recent client alert from the Winston & Strawn law firm examines the ongoing issues and offers steps plans can take.

The alert explains that 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.

DOL Scrutinizes RMD Compliance

To add to the confusion, the DOL apparently has also expanded the scope of its retirement plan audits to include scrutiny of RMD compliance, even though the RMD rules fall under the Internal Revenue Code and have not previously been considered within the purview of the DOL. The alert warns that the DOL has been increasingly moving into this space during audits and trying to impose penalties.

“Numerous plan sponsors have received letters from the DOL during missing participant audits that threaten sanctions against plan fiduciaries for alleged violations of ERISA, despite a lack of definitive guidance on exactly how employers should follow up on a variety of challenges, including bad addresses, returned mail, and missing or unresponsive participants and beneficiaries,” the alert states.

IRS Responds

Meanwhile, an October 2017 IRS memo to the agency’s Employee Plan (EP) auditors directs the staff not to challenge a qualified plan as failing to satisfy the RMD rules if a plan sponsor that demonstrate that certain steps were followed in an attempt to locate a missing participant or beneficiary.

The alert explains that the recommendations outlined in the memo generally follow those in FAB 2014-01, but adds that the IRS procedures are a “little more general and open-ended” than DOL’s. Winston & Strawn advises that, even though the IRS memo is directed at EP auditors, it provides “helpful insight” into what those auditors will be looking for during examinations.

The alert further warns that a failure to locate a missing participant can be a breach of fiduciary duty under ERISA and recommends that plans look closely at procedures for finding missing participants and distributing RMDs.

“Given the potential penalties involved and the need for a coordinated response, it is a good practice to have a missing participants’ policy and designated persons within the organization who make regular efforts to keep participant information current,” the firm states. The alert also notes that it is “good practice” for the plan’s fiduciaries to be alerted whenever a plan is notified of an impending audit.

The IRS also recently sent a field directive to exam agents that expands to 403(b) plans the scope of the October 2017 directive instructing examiners to not challenge a qualified plan for alleged violations of applicable RMD requirements if a plan has taken certain steps to search for missing plan participants or beneficiaries.

GAO Calls for Action

Meanwhile, Congress’ so-called “watchdog agency” on March 5 issued a report calling on the DOL to issue guidance to help ongoing plan sponsors search for separated participants. The Government Accountability Office report examines the challenges that participants face with unclaimed retirement accounts and complying with tax reporting requirements on their foreign retirement savings.

GAO said it was asked to review what steps federal agencies might take to assist participants who lose track of their retirement accounts after they change jobs.

In calling for new guidance, the GAO points to DOL audit findings showing that ongoing DC plans have challenges staying in touch with missing participants and that the agency has already provided guidance for terminated plans, but not specifically for ongoing plans.

GAO makes several recommendations with respect to missing participants, including:


  • DOL should address the obligations under ERISA of sponsors of ongoing plans to prevent, search for and pay costs associated with locating missing participants.

  • IRS should review tax issues relating to distributions involving incorrect participant addresses and uncashed benefit checks, and clarify the IRC’s requirements in these circumstances.

  • IRS should consider revising its letter-forwarding program in a cost-effective manner to again provide information on behalf of plan sponsors on unclaimed retirement accounts to participants. (The IRS disagreed with this suggestion, saying that the IRS address of record for a participant would likely be of no greater value than addresses available through alternatives, such as commercial locator services.)


Asked to comment on the draft report, the DOL in a November 2017 letter said it agreed with GAO’s recommendation that additional guidance may be helpful to assist ongoing plans in meeting their fiduciary obligations.

In the letter, the agency did not specifically indicate that it plans to work on new guidance, but that was before Preston Rutledge, Assistant Secretary of Labor for the Employee Benefits Security Administration, was confirmed. The issue of addressing missing participants is on the Department of Treasury’s priority guidance plan, which was updated in February.

Meanwhile, legislation was recently reintroduced in Congress to establish a “lost and found” participant account database.

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