Connecting Lost Participants to Retirement Accounts

Plan administrators trying to terminate defined contribution retirement plans often find themselves between a rock and a hard place. The Department of Labor (DOL) requires they diligently search for and pay all participants and beneficiaries entitled to benefits. However, participants are not very good at keeping plan administrators informed of address changes. Locating all missing participants is nearly impossible, and plan administrators must then decide how to disburse participants’ funds in a way that fulfills fiduciary duties.

Connecting Missing Participants to Retirement Accounts

When defined contribution plan administrators cannot find participants and beneficiaries entitled to benefits, they often roll over account balances to individual retirement accounts (IRAs) opened up in the missing participants’ names at private financial institutions. Over time, fees eat away at the IRA balances, reducing the amount left for participants and beneficiaries who actually find and claim the IRAs. This is not great for participants.

PBGC Offers Options Previously Available Only to Single Employer Defined Benefit Plans

Administrators of terminating single employer defined benefit plans have long had the option of transferring assets, liabilities and records to the Pension Benefit Guaranty Corporation (PBGC) through its Missing Participants Program. PBGC would then keep track of the benefits owed to former plan participants and pay them when found.

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Beginning in 2018, plan administrators of terminating defined contribution plans can use the PBGC Missing Participants Program too. Plan administrators can either transfer all benefits to PBGC for distribution to participants, or they can notify PBGC of where they have transferred the participants’ accounts so PBGC can help connect missing participants to their benefit plan assets. Plan participants looking for lost benefits can search for free on the PBGC website. PBGC also searches for these participants. Individual account balances earn interest for the participants/beneficiaries while at PBGC.

The expanded PBGC program also applies to small professional service employer defined benefit plans and multiemployer defined benefit plans.

Plan administrators must first take and document specific steps to search diligently for missing or nonresponsive participants or beneficiaries in order to become eligible to use the PBGC Missing Participants Program. DOL Field Assistance Bulletin 2014-01 provides guidance on diligently searching for missing participants.

The expanded PBGC Missing Participants Program gives sponsors of plans that are ending—including defined contribution, small service provider and multiemployer defined benefit plans another reasonable way to handle the account balances remaining in the plan for participants and beneficiaries who cannot be located.

Find out more on the Missing Participants Program section of the PBGC website.

Additional resources

McDermott Will & Emery newsletter, April 3, 2018
Fox Rothschild newsletter, Winter 2018
Vorys Sater Seymour and Pease newsletter, January 25, 2018

Lois Gleason, CEBS
E-Learning/Online Course Instructional Designer at the International Foundation

Lois Gleason, CEBS

Senior Information/Research Specialist at the International Foundation Favorite Foundation service/product: The Employee Benefits Survey (conducted every few years; it is very comprehensive) Benefits-related topic top picks: Affordable Care Act, multiemployer pension plans Favorite Foundation conference moment: Working the bookstore/information center at the Employee Benefit Symposium and meeting our members Personal Insight: Lois loves reading, especially literary classics like Jane Eyre and North and South. A Tale of Two Cities isn’t bad either. Every morning at breakfast she reads the daily newspapers…. yes, she still gets the paper versions because it’s not a big deal if a little coffee spills on them.

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