On January 12, 2021, the U.S. Department of Labor (“DOL”) issued three pieces of informational guidance concerning plan sponsor obligations regarding missing participants: (1) a “best practices” document¹, (2) Compliance Assistance Release 2021-01², and (3) Field Assistance Bulletin (“FAB”) 2021-01³. Although this DOL information does not apply to governmental plans, it could have two key implications for governmental plans. First, although some states have laws governing their governmental plans, not all do, so this guidance can provide ideas for a missing participant process framework at a governmental plan. Second, service providers to governmental plans are likely to import all or some of their lessons from private sector plans to their governmental plan clients.
“Best Practices” Document
The “best practices” document highlights four key practices that DOL believes are indicative of a well-run plan that is mitigating missing participant issues: (1) maintaining accurate census information for the plan’s participant population, (2) implementing effective communication strategies, (3) conducting missing participant searches, and (4) documenting procedures and actions. Unfortunately, some of these recommendations may be problematic as they may violate corporate legal practices and cultural norms, as in the recommendation to use social media or question work colleagues to locate missing participants. A recommendation to publish missing participant names on public and private lists may invite potential fraud and litigation.
DOL also listed certain “red flags” that would draw its attention to a plan: more than a small number of missing or nonresponsive participants; more than a small number of terminated vested participants (“TVPs”) who have reached retirement age but have yet to receive benefits; missing, inaccurate, or incomplete census data; and the absence of sound policies for handling returned mail and uncashed checks.
Compliance Assistance Release 2021-01
Addressed to the Employee Benefits Security Administration’s Regional Offices, CAR 2021-01 provides insight into what factors DOL investigators examine in a defined benefit plan audit concerning TVPs. These factors include examining internal procedures for searching for unresponsive TVPs and reviewing contracts with third-party recordkeepers and service providers. Although the DOL does not investigate governmental plans, this guidance might help provide insights for governmental plans and their own compliance programs.
FAB 2021-01 states that DOL will not pursue fiduciary breach claims against plan fiduciaries or certain Qualified Termination Administrators of abandoned plans, provided certain conditions are met. This guidance is temporary and is only an enforcement policy.
The guidance does not create any clear, bright-line rules nor does it bind the regulated community. Governmental plan fiduciaries may benefit from discussing this perspective from the DOL with their advisors and counsel and looking to see what lessons might be useful for their plans.
Missing Participants – Best Practices for Pension Plans, U.S. Department of Labor (Jan. 12. 2021).
Compliance Assistance Release No. 2021-01.