Review of DOL Missing Participant Guidance
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
“I am responsible for our company’s Employee Retirement Income Security Act (ERISA) 403(b) retirement plan and understand that the Department of Labor (DOL) recently released guidance on missing participants. Is there anything we should be concerned about as an ERISA 403(b) plan sponsor?”
Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
This is a great question. Up until earlier this year, it wasn’t just the participants who were missing—the guidance was missing, too. But on January 12, 2021, the DOL finally issued its long-awaited missing participant guidance. Let’s take a quick tour of what was included.
The new guidance has three components. The first is Field Assistance Bulletin (FAB) 2021-01, which outlines the DOL’s enforcement policy regarding the use of the Pension Benefit Guaranty Corporation’s (PBGC) missing participant program for terminating defined contribution (DC) plans. You may recall that while this program was originally just for defined benefit (DB) plans, in 2017, the PBGC expanded the program to include DC plans. Although only temporary, the new FAB may provide some helpful assurances for plan fiduciaries and qualified termination administrators (QTAs) regarding their own fiduciary liability when managing abandoned plans.
The second piece is Compliance Assistance Release 2021-01, which describes the DOL’s objectives and general approach in missing participant investigations of DB plans. The release provides some helpful insights about the DOL’s investigatory process that may be applied to DC plans as well. For example, the release notes that the DOL may launch an investigation of a plan as a result of Form 5500 filings that “report a large number of retired or terminated vested participants who are entitled to future benefits.”
Last but not least, the final component of the new guidance is a “best practices” document geared for plan fiduciaries. The document describes various considerations for plan fiduciaries, including “red flags” that may indicate a missing participant problem, as well as a long list of what the DOL considers best practices for participant searches.
Turning to your question, parts of the new guidance may certainly raise legitimate concerns for plan fiduciaries. For example, the DOL’s suggestions for search steps include publicizing a list of missing participants on company intranets, as well as collecting and using social media information to contact participants. Understandably, plan fiduciaries may be hesitant to take such steps not only due to individual privacy concerns but also because of cybersecurity considerations at a time when such risks are already on the rise.
But at the end of the day, plan fiduciaries grappling with such concerns may take some comfort from the guidance. The new guidance expressly preserves flexibility for plan fiduciaries to shape their missing participant practices as they deem appropriate. In this regard, the new guidance helpfully recognizes that “not every practice . . . is necessarily appropriate for every plan,” and that “[t]he specific steps taken to locate a missing participant, or to obtain instructions from a nonresponsive participant, will depend on facts and circumstances particular to a plan and participant.”
Thus, while plan fiduciaries should consider the DOL’s suggested search practices and determine if they are appropriate for their plans, the DOL’s assurances regarding the flexibility of the new guidance should help relieve many of the concerns plan fiduciaries might otherwise have.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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