DOL Missing Participant Guidance Not a List of Requirements

Earlier this month, the U.S. Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) issued guidance to help retirement plan fiduciaries locate and distribute retirement benefits to missing or nonresponsive participants.

The guidance included three parts. A page titled “Missing Participants – Best Practices for Pension Plans” describes a range of best practices for fiduciaries of retirement plans to consider. Compliance Assistance Release 2021-01 reveals the information EBSA staff request from plan sponsors and the errors they look for during investigations under the Terminated Vested Participants Project for defined benefit (DB) plans. Field Assistance Bulletin 2021-01 authorizes plan fiduciaries of terminating defined contribution (DC) plans to use the Pension Benefit Guaranty Corporation (PBGC) missing participant program for missing or nonresponsive participants’ account balances.

“We think this is a good first step,” says Aliya Robinson, senior vice president, retirement and compensation policy, at the ERISA Industry Committee (ERIC). “We had been working with the EBSA for several years, asking for guidance. We think this best practices list is informational—but we want to make sure it doesn’t become a requirements list, because not everything on that list works for every employer.”

In a blog post, lawyers at Morgan Lewis expressed a similar unease, saying “there is a concern that the DOL, or private litigants, may attempt to frame the DOL guidance as a baseline of expected practices.” This is a concern even though the DOL guidance recognizes that not everything in its best practices document is appropriate for every plan.

Other attorneys offer pointers for implementing the DOL guidance. A client alert from B. David Joffe, a partner at Bradley, and Caleb L. Barron, an associate at Bradley, says plan sponsors should have a policy for finding missing participants and update it with additional steps they will take per the DOL guidance.

The attorneys also point out that all efforts to locate participants should be documented. “With written evidence that a prudent process is in place and is being followed, a plan administrator should be able to demonstrate that participants are not missing due to any fiduciary shortcomings,” they write.

In another blog post, Kimberly S. Couch, a partner with Verrill Law, points out, “Although plan fiduciaries may delegate recordkeeping, participant communication and missing participant searches to third-party administrators [TPAs], plan fiduciaries must ensure that the delegate has established and is following sound procedures. Plan fiduciaries are ultimately responsible for ensuring benefits are paid accurately and timely under the retirement plan.”

While the DOL guidance was comprehensive, the attorneys at Morgan Lewis say it still leaves unanswered questions and creates some new ones. “For example, the DOL guidance does not materially address how plans should handle participants that are the least likely to be locatable and/or still due a benefit, such as participants that are very old, long missing, long deceased or have material data gaps (such as incorrect Social Security numbers),” they write. “Another issue unaddressed by the guidance is how plans should address issues such as identity theft or plan resource limits, which may hinder search and outreach efforts. Finally, there is no acknowledgement in the DOL guidance of the challenges of participant inaction (such as participants that are not missing but voluntarily do not commence benefits or do not cash checks).”