PBGC Wants to Help More Sponsors Find Missing Participants

Instead of establishing an individual retirement account at a financial institution for each missing participant account, more plans would have the option of transferring benefits to PBGC. 

The Pension Benefit Guaranty Corporation (PBGC) is proposing to expand its existing Missing Participants Program to cover terminated 401(k)s and “most other defined contribution plans and certain defined benefit plans that aren’t currently covered by the program.”

For over 20 years, PBGC’s Missing Participants Program has connected people—missing when their pension plans terminated—to their retirement benefits. Currently, the program is open only to PBGC-insured single-employer plans.

“Many people associate PBGC with paying benefits for people in failed plans, but our mission is broader than that,” observes PBGC Director Tom Reeder. “We are also responsible for enhancing retirement security for American workers and retirees. One of the ways to do that is to connect them with their retirement savings.”

Under a proposed rule newly floated by PBGC and slated for formal publication in the Federal Register on September 20, 2016, the program would be expanded to cover missing participants in most terminated defined contribution plans, such as 401(k) and profit sharing plans. Perhaps most important, instead of establishing an individual retirement account (IRA) at a financial institution for each missing participant account, these plans would have the option of transferring benefits to PBGC.

“PBGC would then hold the money, add the missing participant to its online searchable database, and periodically search for the participant,” Reeder explains. “Participant accounts would not be diminished by ongoing maintenance fees or distribution charges and would be paid out with interest.”

NEXT: Strong need for such a system

If approved as proposed, PBGC anticipates the expanded program will be implemented in 2018, after receiving public comments and publication of a final regulation.  At present, PBGC explains, a central database of defined contribution participants missing when the plan terminated does not exist, making it difficult for people to find their accounts.

“When implemented, PBGC's expanded program will make it easier for people to locate their retirement benefits after their plan is terminated,” Reeder predicts.

PBGC is also proposing “modest changes” to the way the program works for PBGC-insured single-employer plans. The changes relate primarily to how plans determine the amount of money to transfer to PBGC, better protection of key features of a participant's benefit (e.g., early retirement subsidies), and reducing the burden of transferring benefits to PBGC.

Under the proposal, the expanded program would cover PBGC-insured multiemployer plans that close out and certain defined benefit plans that aren't insured by PBGC (i.e., small plans sponsored by professional service organizations). PBGC expects limited usage by these plans.

“PBGC looks forward to public comments on the proposal so that we can make the program as useful as possible,” Reeder concludes.

For more information on the rulemaking and how to comment, visit the Overview of the Proposed Expanded Missing Participant Program webpage.