Missing Participants in Employee Benefit Plans

By Robert Jannelli, CPA

Are you the administrator of a Defined Contribution Retirement Plan?  Maybe you are a trustee of one of these types of employee benefit plans.  Or maybe you are the owner of a company that sponsors such a plan.  If you are and were asked the question “does the retirement plan have procedures for locating missing participants”, would you be able to say yes?  Maybe you already have a procedure but is it effective?  Are you doing enough to locate these missing participants?

One thing is certain.  The Department of Labor (“DOL”) would expect the retirement plan to have procedures for locating missing participants who have vested account balances.  Plan fiduciaries have an obligation under the Employee Retirement Income Security Act (“ERISA”) to locate missing participants in order to distribute vested account balances to which these participants are entitled to receive.  While this is particularly important when a plan has or is in the process of terminating, it is also a very good policy for ongoing plans.

The DOL requires that plan fiduciaries make a “reasonable” effort to locate missing participants including beneficiaries of deceased participants.  In August 2014, the DOL issued updated guidance regarding a fiduciary’s duties to locate missing participants.  The following is a summary of the DOL’s minimum search steps:

  1. Use Certified Mail.  This is an easy and low-cost method although it is not required as other notices can be used as well.
  2. Check Related Plan and Employer Records.  Many employers have related employee benefit plans such as health insurance and other retirement plans.  Those plans may have more updated records that can be utilized to locate missing participants.  For any privacy concerns, a formal request can be made to the related plan asking them to send a letter to the missing participant requesting the participant contact the plan that is attempting to locate them.
  3. Check with Designated Plan Beneficiary.  If the missing participant has designated a beneficiary, the plan should contact the beneficiary to obtain information about the missing participant.  Again, for any privacy concerns, the plan can request that the beneficiary send a letter to the missing participant requesting the participant contact the plan that is attempting to locate them.
  4. Use Free Electronic Search Tools.  Plan fiduciaries should use internet search tools, obituaries, social media, and other free sources to search for a missing participant.

When these more inexpensive procedures do not result in locating missing participants, plan fiduciaries should then consider utilizing other resources such as commercial locator services, credit reporting agencies, investigation databases, and other similar services where charges may be involved.

Plan fiduciaries should also consider performing the same procedures for Defined Benefit Retirement Plans if there are any missing terminated or separated participants that have vested credits. 

It is important to note that while most employee benefit plans have personnel that make administrative decisions, it is ultimately the responsibility of the plan fiduciaries to adopt procedures to locate missing participants.  Remember, it is much harder to make a case for not doing anything versus doing some minimal procedures that may or may not result in locating these participants. 

Note:  This article does not consider what plan fiduciaries should do when they are unable to locate missing participants.  Plan fiduciaries should refer to the plan document or refer to other guidance on what to do with account balances where a participant cannot be located.

Learn more about how MSPC supports employee benefit plans or contact Bob Jannelli about any questions you may have about this article.