Americans typically hold a dozen or more jobs throughout their careers,1 and 70% of American workers have access to an employer-sponsored retirement plan.2 This means that throughout a career, a worker could participate in more than eight retirement plans, such as 401(k)s, 403(b)s, and IRAs. If account holders don’t roll over their savings from one plan to the next plan, that’s a lot of plans to keep track of—and when you consider plan name and recordkeeper changes, it gets even more complicated. This is just one of the many ways plans end up with missing participants. But it doesn’t matter why they’re missing—as a retirement plan fiduciary, you have a duty to try to find them.
Why retirement plan fiduciaries need to care about missing participants
Under ERISA, your fiduciary duty includes keeping accurate data and paying participants and beneficiaries when benefits are due. And when participants don’t keep their information up to date, that duty doesn’t change. The email addresses, mailing addresses, and phone numbers you have on file could be old, mistyped, or just missing, but your duty still extends to all participants, including inactive, terminated, and missing participants—which means you must make a reasonable attempt to find them or be found in breach of your fiduciary duty.
Failure to locate missing retirees could even cause the plan to lose its qualified status in certain situations, if efforts to locate them haven’t been made and documented. For example, retirees are required to take an annual minimum distribution, generally as of age 72 (if born after June 30, 1949) or age 70½ (if born before July 1, 1949), and most wouldn’t be aware of the requirement or how to do so without communication from the plan. The inability to find a participant doesn’t necessarily relieve the plan of the required communication and distribution, which could put its status in jeopardy.
Best practices to guide fiduciaries
The DOL’s Best Practices contains a list of best practices they’ve observed and that may be used to guide retirement plan fiduciaries in fulfilling their duty to find missing participants. The guidance notes that “Not every practice … is necessarily appropriate for every plan.” As is often the case, prevention is as important as resolution. And as with other fiduciary duties, prudence and reasonableness should be your guide. Consider factors such as the plan’s population, the size of a missing participant’s account balance, and the cost of search efforts in determining the best actions to take.
Prevent retirement plan participants from going missing
Work with your recordkeeper on prevention
- Provide your recordkeeper with complete and up-to-date census data. When census data is incorrect, your recordkeeper receives returned mail and email. With any luck, if one piece of census data is incorrect, the others will be correct and you can rectify the situation quickly. The sooner you identify incorrect data, the easier it’s likely to be to locate the participant’s contact information.
- Ask your recordkeeper how they flag or report the following:
- Bad email addresses
- Returned emails
- Returned mail
- Uncashed checks
- Regularly ask participants to update their contact information.
- During employee onboarding and exiting, ask for complete contact information, including email addresses, mobile phone numbers, and emergency contacts.
- Provide online prompts and send out regular communications to active, inactive, and terminated participants requesting they update their contact information.
- Make sure they understand it’s in their best interest—if they lose touch with the plan, they lose touch with their hard-earned savings.
- Ask participants to update their:
- Phone numbers—landlines and mobile
- Mailing address and physical address
- Email address (work and personal)
- Emergency contact information
- Social media
- Send regular requests to update beneficiaries, including their contact information.
Process: Prioritize contact data
- Make sure updated contact information from other sources—health and other benefits programs—makes it into census data.
- Regularly audit census data.
- During corporate actions such as mergers, acquisitions, and divestitures, conduct an audit of all employee records—e.g., health plans, retirement plans, and other employee records—to bring all up to date and conduct missing participant searches, if needed.
Communicate clearly and routinely
- Make the topic and urgency of a communication clear in subject lines and on envelopes.
- Inform all active, inactive, and terminated employees when there’s a change of plan name, sponsor, or recordkeeper. Make sure the name they’d be familiar with is included in the subject line of an email or on the envelope of a mailing.
- Provide communication to participants about how they may be eligible to consolidate retirement accounts from previous employers into the plan.
Best practices to find missing participants
First level of search: no-cost methods
- Try all means of communication listed in the employee’s records—e.g., if mail is returned, try the email address or phone number (mobile or landline), if available.
- Check all sources of employee data—such as payroll, health plans, and other benefits programs—for contact information, including emergency contacts, next of kin, and beneficiaries.
- Conduct an online search of public databases, obituaries, and social media.
- Ask former co-workers if they have any means of contacting the missing participant or their family. This may raise privacy concerns, so it’s wise to consult with privacy subject matter personnel or counsel.
- Publish “a list of missing participants on an intranet site, in email notices to existing employees, or in communications with other retirees who are already receiving benefits.” Because this may also raise privacy concerns, please consult with privacy subject matter personnel or counsel.
- Add the missing participant to pension registries that offer cybersecurity and privacy measures, such as the National Registry of Unclaimed Retirement Benefits. Please consult with privacy subject matter personnel or counsel to be aware of any privacy or cybersecurity concerns before taking these actions.
- For Taft-Hartley plans, work with local union offices for help.
Second level of search: fee-based methods
- In its Best Practices, the DOL states that you may consider the plan’s population, the size of the missing participant’s account balance, and the cost of search methods in determining your course of action. As with all fiduciary decisions, make sure you document your efforts and decision-making process.
- Use a locator service, such as LexisNexis or a credit reporting agency.
- Use a fee-based online search tool.
- Use United States Postal Service certified mail or another delivery service with tracking features to send communications to the last known mailing address.
- Contact the U.S. Social Security Administration for death information at ssa.gov/dataexchange/request_dmf.html.
As with all fiduciary duties—document, document, document
You’ll likely work with your retirement plan recordkeeper and other plan partners for help locating missing participants. As with all your fiduciary duties, make sure you document all your conversations, decisions, and efforts to locate missing participants. Include a review of your recordkeeper’s related processes in your due diligence. For example:
- Do they scrub census data as part of their onboarding process?
- Do they flag returned mail and email?
- Do they provide reports of uncashed checks?
- Do they provide prompts for participants to confirm contact information upon logging on to online platforms?
Do your fiduciary best to find missing retirement plan participants
Following the issuance of its Best Practices, the DOL expects plan fiduciaries to make a concerted effort to prevent missing participants and find those who are missing. It’s up to you to determine which actions and search methods are prudent and reasonable in terms of costs and methods, factoring in the plan population and the account balance at stake. If the measures you’re considering raise privacy and cybersecurity issues, be sure to consult with a privacy or cybersecurity professional. Whichever methods you choose, document your process and why you chose or didn’t choose a method. And remember, preventive methods can cost less than search in time and effort, as well as money.
1 “Number of Jobs, Labor Market Experience, and Earnings Growth: Results from a National Longitudinal Survey Summary,” U.S. Bureau of Labor Statistics, 8/22/2019. 2 “Worker Participation in Employer-Sponsored Pensions: Data in Brief,” Congressional Research Service, December 2020.
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
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