Connect with us

Hi, what are you looking for?

Trending News

Missing participants guidance published by Department of Labor

The DOL on Tuesday told retirement plan sponsors how to avoid getting in hot water over plan participants they’ve lost track of, including guidance on how employers should try to locate such “missing” participants.

That guidance comes years after it was requested by industry groups. The Department of Labor regularly investigates employers for the issue of missing participants, but until now it hadn’t provided clear steps on how to remedy the problem.

Employers had previously relied on guidance from the IRS on how to deal with terminated plans, though the federal Pension Benefit Guaranty Corp. launched a 401(k) missing participant program in 2017, said Jason Roberts, CEO of the Pension Resource Institute.

“This issue, as of the last couple of years just kept coming up,” Roberts said, citing instances in which plan sponsor clients were under DOL investigations. “They would say, ‘You haven’t done enough to find them,’” without telling sponsors who to address the alleged shortcoming.

The guidance has three components a description of best practices for retirement plans, a compliance assistance release and a field assistance bulletin outlining 401(k) sponsors’ use of the PBGC missing participant program.

One group, the ERISA Industry Committee, had asked the DOL since at least 2018 to provide clarity. In a statement, the group praised the agency for a “good first step.”

“The Compliance Assistance Release provides transparency in the DOL’s enforcement efforts and provides a national enforcement standard that employers can look to,” Aliya Robinson, senior vice president of retirement and compensation at ERIC, wrote in the statement. “While we remain concerned that best practices become de facto requirements, we appreciate the sharing of policies and operations that have been successful.”

HOW TO TELL IF YOU HAVE A PROBLEM

In its missing participant guidance, the DOL noted that “the first step in addressing any problem often is knowing that there is one.”

The Employee Benefits Security Administration “has learned from its experience and from plan sponsors that the following ‘red flags’ are often warnings or indicators of a problem with missing or nonresponsive participants,” the DOL stated.

Such red flags include “more than a small number” of nonresponsive plan participants or of terminated vested participants who have not started taking payments from the plan upon reaching retirement age. Other cues are a lack of contact information for participants and no clear policies for how to deal with undeliverable mail or uncashed checks, the DOL noted.

It outlined best practices for ensuring sponsors keep track of former employees who have balances in the plan, such as contacting them periodically, including through social media or next of kin, if necessary. Plans can also ask participants for updated contact information when they log on access their accounts, among other suggestions.

Further, employers should use plain language to tell participants about their benefits, including the need to take required minimum distributions when applicable, the regulator said. When employees leave a company, the separation process should include getting updated contact information for the plan participant.

If an employer can’t find a participant, the DOL pointed to free and paid online search programs and public records. If participants don’t respond, employers can reach out to a former employee’s colleagues or check the Social Security Death Index.

[More: Massachusetts finds MetLife ‘missing’ pensioners, Galvin says]

A BIG PROBLEM

The issue of missing participants is no small matter. Often workers who are automatically enrolled in 401(k)s pay little attention to their accounts, and in many cases are unaware they even have one. Upon termination from a job, they might have accrued enough to keep their assets in the plan, meaning that the account isn’t automatically cashed out.

In 2016, the DOL started a pilot program to address the issue. It recovered about $327 million in missing participants’ plan assets in 2017 and about $115 million in 2018.

The new guidance will clearly help plans to avoid DOL investigations and ensure they keep track of their participants, Roberts said.

“The takeaway for advisers is to proactively engage with their plan sponsors on these issues,” he said. “Any time a regulator gives you a road map, you are well-served to follow it.”

[ESG Video: Making of ‘Flowers in the River’]



Source link

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Trending News

via blogmaverick I wanted to get an understanding of what opening meant to businesses around Dallas. Were they opening? What precautions were they taking? Were...

Trending News

by Dr. Eowyn Washington State governor Jay Inslee is not only a rabid leftist (see “Washington Gov. Jay Inslee Signs Seven Anti Gun Bills...

Trending News

Canada Life has extended its segregated portfolio service (SPS) to a wider range of bonds. The SPS provides clients with access to an offering...

Trending News

by Tom Wigand Cross-posted from trevorloudon.com An ordained minister from Chicago. A former Black Panther. Supported by the Democrat Socialists of...