DOL Tips for Retirement Plan Trustees In search of Lacking Members Epstein Becker & Inexperienced

The US Department of Labor (“DOL”) recently issued important guidelines (“Guidelines”) for pension plan sponsors and trustees on their obligations to locate missing participants who are eligible for pension plan benefits. Sponsors and trustees of pension plans are at a higher risk as the DOL increasingly conducts audits of missing participants. (You can find more information on audits of missing participants here.)

The guide generally addresses the following three components of missing participant problems faced by sponsors and trustees of retirement benefit plans: (1) locating terminated vested participants in defined benefit plans, (2) best practices for managing missing participants, and (3 ) Participation in the Guarantee Corporation (“PBGC”) Missing Participant Pension Benefit Program to terminate defined contribution plans. The DOL states that the guidelines do not have the force and effect of the law and are only intended to clarify existing requirements.

The following is a summary of the three components of the guide:

  1. Compliance Assistance Release 2021-01 (“Compliance Release”). In the compliance press release, DOL describes its Vested Defined Benefit Termination Plan (“TVPP”) project, which is an investigative process that focuses on defined benefit plans that appear to continue to have problems with the distribution of benefits to terminated benefits Free movement participants (TVPs) occur ”). Signs of such persistent problems are large numbers of terminated participants who are eligible for future benefits and the involvement of the Plan Sponsor in a merger or acquisition.

Upon opening a TVPP investigation, the DOL declares that it will request various documents from the Trustee, including the plan, the plan summary description, participant details, actuarial reports, and written plan procedures for locating and contacting missing participants. If the Plan Trustee does not provide the requested documents by the response date, the DOL may issue a subpoena to force the documents to be submitted.

The compliance press release states that the DOL is looking for “red flags”, e.g. B. Inadequate procedures to (i) locate missing participants, (ii) contact laid-off employees who are eligible to begin paying plan benefits, and (iii) address unpaid checks. For example, the DOL notes that communications from employees failing to disclose the date from which the individual is entitled to benefits or the excise duty due on late required minimum payouts can exacerbate a TVP problem. Additionally, DOL has found that mergers, acquisitions, and company name changes increase the likelihood that attendees will ignore emails addressed to them from a company they believe they have never worked for.

When a TVPP detects systemic failures, the DOL will indicate that it is asking the Plan Trustee to take corrective action. If the Plan Trustee takes appropriate action, DOL states that it will generally not cite the Plan Trustee for certain violations of the 1974 Retirement Income Protection Act, as amended (“ERISA”) when a case is closed becomes.

  1. Missing Participants – Best Practices for Retirement Plans (“Best Practices Summary”). The best practices summary lists best practices that apply to both defined benefit and defined contribution plans. The DOL trustees can follow to ensure that plan participants receive the benefits they are entitled to. The DOL recognizes that the Best Practices Summary includes “some” of the practices used by well-managed plans, but that not every practice listed in the summary is appropriate for every plan. The Best Practices Summary provides a variety of methods to (i) obtain accurate census information, (ii) implement effective communication strategies, (iii) search for missing participants, and (iv) document procedures and actions used to search for missing participants.
  2. Field Assistance Bulletin 2021-01 (“FAB”). In the FAB, the DOL is announcing a temporary enforcement policy for the termination of defined contribution plans that use the PBGC missing participant program. The Missing Participant Program allows trustees to cancel defined contribution plans to transfer missing participant accounts to the PBGC, which may increase the likelihood that those participants will receive their benefits. However, a transfer to the PBGC is not covered by the DOL’s fiduciary safe harbor for termination of defined contribution plans, which generally requires distributions to be transferred to an individual retirement account or annuity (“Safe Harbor”). For this reason, the FAB declares that DOL will not pursue fiduciary breach violations under Section 404 (a) of ERISA against plan trustees who terminate defined contribution plans that use the Missing Participant Program in lieu of Safe Harbor.

The DOL requires this relief from the Trustee’s compliance with the FAB and the fair interpretation of Section 404 of ERISA in good faith with respect to matters not dealt with in the FAB. The FAB requires, among other things, that trustees participating in the Missing Participant Program otherwise adhere to Safe Harbor and inform participants that their accounts have been transferred to the PBGC.

Considerations and Next Steps for Plan Trustees

As the guidelines are not final, it is unclear to what extent the DOL will enforce the guidelines in the context of a TVPP or other assessment. However, compliance with the guidelines may, to the extent practicable, mitigate the risk associated with such investigations and audits and assist Plan Trustees in developing procedures to locate missing participants.

To comply with the guidelines, trustees should take the following steps:

  • Determine if the retirement plan has red flags indicating an issue with missing or unresponsive attendees.
  • Use the DOL best practices list in the Best Practices Summary to create a policy and procedure to identify and locate missing and unresponsive participants.
  • Once found, provide the missing participants with written notices with full details of the plan benefit so that payment of their benefits under the plan terms can begin as soon as possible.
  • Document efforts to identify and locate missing and unresponsive participants and pay for their plan benefits.

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