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Employers and plan sponsors have a fiduciary duty to find missing retirement plan participants. Provisions in the SECURE 2.0 Act of 2022 may help ease this ongoing challenge.

Finding missing retirement plan participants is one of the most frustrating issues plan sponsors encounter in retirement plan administration. But staying in touch with plan participants is a fiduciary duty and particularly important when plans are terminating or when the missing participants reach the age when they must take required minimum distributions (RMDs) from their retirement plans. 

With all the advancements in digital communications, it should be getting easier to find missing participants, but the challenge is growing as people change jobs more frequently and move more often. Missing participants include those who have terminated employment and leave behind money in their defined contribution (DC) retirement plans or are eligible for benefits from a defined benefit (DB) plan but have lost contact with the plan. These participants may fail to respond to emails or move without notifying the employer or plan sponsor. 

Help From SECURE 2.0 

New requirements in the SECURE 2.0 Act of 2022 (SECURE 2.0) go into effect this year that should directly or indirectly help plan sponsors find missing participants.  

Retirement Savings Lost and Found Database  

Starting in 2024, plan sponsors will be required to annually submit information about terminated participants to the Department of Labor (DOL). This information includes names, taxpayer identification numbers, and the nature, amount and form of payment of the deferred benefits and will be used to populate the Retirement Savings Lost and Found (RSLF) online database that SECURE 2.0 will establish by December 29, 2024.  

The RSLF database is designed to help plan participants find their retirement savings accounts by allowing them to search a single database and contact plan administrators. In November 2023, the Technology Modernization Fund, a fund that invests in federal technology projects, announced it would invest $3.5 million to help establish the online registry. 

Plan sponsors will not be allowed to use the RSLF database to find missing participants, but it will help participants find plan sponsors—effectively reducing the number of missing participants. However, DOL will have the ability to search for missing participants in the RSLF database and contact plan administrators if missing participants are located. SECURE 2.0 requires DOL to have the RSLF operational by the end of 2024.<1> 

Autoportability  

Another SECURE 2.0 provision addresses the issue of job mobility. Under the law, plan sponsors can automatically transfer small retirement account balances ($1,001 to $7,000) to a participant’s plan with their new employer without the participant’s consent, referred to as autoportability. This is a significant change, since previously plan sponsors could make these transfers only with the participant’s affirmative consent. 

The law seeks to address the growing problem of retirement account leakage, which occurs when 401(k) and other retirement plan participants forget about their benefits or cash them out early and lose out on long-term returns. SECURE 2.0 also increases the maximum account balance threshold for offloading a former employee’s retirement account into a default individual retirement account (IRA) from $5,000 to $7,000 for distributions made after December 31, 2023. Accounts with less than $1,000 can simply be distributed directly to the participant. 

Plan sponsors must meet the following requirements when making the automatic transfers to the new employer plan: 

• Provide participants with information about the benefits of autoportability, the eligibility criteria and how to opt out. 
• Provide participants with at least a 60-day notice period before their account balance is automatically transferred.  
• Use a secure process for transferring account balances that protects the participant’s personal and financial information. 

Plan sponsors will still be required to send plan notifications to former employees with account balances greater than $7,000 and allow them to remain participants. If they are unable to locate these participants, plan sponsors could be subject to DOL penalties for failing to comply with reporting and disclosure requirements. On January 29, 2024, the Department of Labor published a rule proposal to implement and codify the autoportability process. 

RMD Age Increase 

SECURE 2.0 increases the age at which RMDs must begin to age 73 for participants who turn 72 after December 31, 2022. This builds on changes previously included in the original SECURE Act that increased the RMD age from 70.5 to 72 for participants who turned 72 before January 1, 2023. The RMD will further increase to 75 in 2033 under SECURE 2.0 

Plan sponsors are required to send an RMD notice to participants who have reached RMD age by January 31 of the year following the calendar year in which they reach the RMD age. For example, a participant who turned 73 in 2023 should be notified of the RMD by January 31, 2024. If a retirement account owner fails to withdraw the full RMD by April 1, the amount not withdrawn is subject to an excise tax. SECURE 2.0 drops the excise tax rate to 25%; possibly 10% if the RMD is timely corrected within two years.<2> 

While it is not directly related to finding missing participants, this provision effectively gives plan sponsors a bit more time to find applicable missing participants before they reach RMD age.  

DOL Best Practices for Finding Missing Participants 

On January 12, 2021, the Employee Benefits Security Administration (EBSA) of the DOL, issued updated examples of best practices for locating missing participants.<3> Based on EBSA’s experience working with plans, the following practices have proven effective at minimizing and mitigating the problem of missing or nonresponsive participants. (Slightly condensed for this article.) 

1. Maintain accurate census information for the plan’s participant population 

• Periodically contact current and retired participants as well as  beneficiaries to confirm or update their contact information.  
• Flag undeliverable mail/email and uncashed checks for follow-up. 
• Maintain an online platform that participants can use to update contact information and provide prompts to confirm contact information upon login. 
• Regularly audit census information and correct data errors. 
• In the event of a business merger or acquisition by the plan sponsor, make missing participant searches, related plan and employer records part of the transfer of records. 

2. Implement effective communication strategies 

• Use plain language and offer non-English language assistance when appropriate. 
• State upfront and prominently what the communication is about.  
• Encourage contact through plan/plan sponsor websites and toll-free numbers. 
• Build steps to confirm contact information and when benefits are due and owed  into the plan onboarding processes for new employees and exit processes for separating employees. 
• Communicate how the plan can help eligible employees consolidate accounts from prior employer plans or roll over individual retirement accounts (IRAs). 
• Clearly mark envelopes with the original plan or sponsor name for participants who separated before the plan name changed and indicate that the communication relates to pension benefit rights. 

3. Conduct missing participant searches 

• Check related plan and employer records for participant, beneficiary and next of kin/emergency contact information. It’s possible that the employer’s payroll or health plan records may have more up-to-date information. 
• Check with designated plan beneficiaries and the employee’s emergency contacts for updated contact information; if there are privacy concerns, ask the beneficiary or emergency contact to forward a letter to the missing participant. 
• Use free online search engines, public record databases, obituaries and social media to locate individuals. 
• Use a commercial locator service, a credit-reporting agency or a proprietary internet search tool to locate individuals. 
• Attempt to contact by sending information through U.S. Postal Service  certified mail or private delivery service with similar tracking features if it is less expensive than certified mail, to the last known mailing address. 
• Attempt to contact via other available means such as email addresses, telephone and text numbers, and social media. 
• If participants are nonresponsive over time, perform death searches or use death audit services to confirm a participant’s death and redirect communications to beneficiaries.  
• Reach out to colleagues by publishing a list of “missing” participants on the company’s intranet, in email notices to current employees or in communications with other retirees already receiving benefits. Similarly, for unionized employees, reach out to the union’s local offices and through union member communications to find missing retirees. 
• Register missing participants on public and private pension registries with privacy and cyber security protections (e.g., National Registry of Unclaimed Retirement Benefits), and publicize the registry through emails, newsletters and other communications to current employees, union members and retirees. 

4. Document procedures and actions 

• Document the plan’s policies, procedures, key decisions and actions. 
• For plans that use third parties to maintain plan records and participant communications, identify and correct any shortcomings in the plan’s recordkeeping and communication practices. 

Other services and techniques that plan sponsors may want to consider include the following. 

• Data analytics and matching services: Advanced data analytics tools and matching services can sift through vast amounts of public and private data, including social media, voter registries and change-of-address records, to identify potential matches with missing participants. These tools can also cross-reference information from multiple sources to increase the accuracy of matches. 

• Business networking and alumni groups: Leveraging business  networks and alumni groups can be a valuable approach for reaching missing participants who worked for the company in the past. Plan administrators can collaborate with former employees and alumni associations to share information about missing participants and encourage them to reach out if they have any leads. Plan sponsors should be mindful of participants’ privacy when using these methods and only collect and use information that is necessary for locating them. 

• Social media searches: Social media platforms like Facebook, LinkedIn and X (Twitter) can be valuable tools for locating missing participants. By using search filters and algorithms, these platforms can help identify individuals by name, former company affiliation or other relevant criteria. 

Summary 

Several provisions in the SECURE 2.0 Act may help employers and plan sponsors find missing participants or reduce the number of those who go missing. Challenges remain, however, so the best approach is to be proactive and put steps in place that will help the plan maintain contact with participants.  

Endnotes 

<1>SECURE 2.0 §303, creating Employee Retirement Income Security Act (ERISA) §523(a). 

<2>SECURE 2.0 §302, amending Internal Revenue Code §4974(a). 

<3>Compliance Assistance Release No. 2021-01.  

John Bikus is president of The Berwyn Group, a population data management company. Prior to joining The Berwyn Group, he helped start, grow and sell two online companies—ObitData.com, an online data and research company, and Legacy.com, an online obituary services company. He also has marketing, sales and research experience with Kraft Foods and AC Nielsen. Bikus holds an M.B.A. degree from the University of Chicago.