DOL Urges Recoupment of Uncashed Checks From Prior Recordkeepers
Attorneys from Morgan Lewis suggest plan sponsors proactively reach out to prior providers to find out if there are any undelivered assets.
Law firm Morgan Lewis is reporting that the Department of Labor (DOL) has issued letters urging retirement plan sponsors to recoup amounts held by former recordkeepers or paying agents from benefit checks that were uncashed by participants.
In an ML BeneBits blog post, attorneys say the letters seem to be spurred by the recent wave of DOL investigations focused on providers and recordkeepers that service Employee Retirement Income Security Act (ERISA) plans. They notify retirement plan fiduciaries of the existence of small uncashed check balances and direct them to coordinate with former recordkeepers to restore these amounts to the participants and beneficiaries who failed to cash the checks.
“Without imposing a deadline, the letters ask that plan fiduciaries provide the DOL with copies of documentation (a) confirming that uncashed check amounts, including lost earnings, have been returned, and (b) sufficient to demonstrate that the funds have been appropriately allocated to the accounts of affected participants and beneficiaries,” the blog post says.
In January, the DOL issued guidance, in three parts, offering suggested processes for defined contribution (DC) and defined benefit (DB) plans to locate missing participants. However, the Morgan Lewis attorneys note that “guidance from the DOL on a fiduciary’s obligations with respect to uncashed checks continues to be scarce.”
They suggest that plan fiduciaries consider reviewing recordkeeping and service provider agreements as well as uncashed check procedures to confirm existing processes and practices. They also recommend that fiduciaries “consider proactively reaching out to former recordkeepers, trustees or paying agents—particularly if there have been recent changes in any of these relationships—to find out if there are any undelivered assets—even small amounts—that remained behind after the transition.”
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