So far in 2024, the Department of Labor (DOL) has released proposals for plan administrators to populate a missing participant database and automatic portability of retirement plan accruals when employees change jobs. The DOL also finalized a retirement security rule package and amended prohibited transaction exemptions (PTEs) that will result in more fiduciaries and cover more transactions. Steven Grieb, senior compliance counsel at Gallagher, provided plan sponsor considerations during a webcast on three DOL developments.

1. Retirement Savings Lost and Found

The SECURE 2.0 Act required the DOL to set up a national online database that will enable missing participants to search for the contact information of their retirement plan administrator. Missing participants are retirement savers who have lost track of their pension or 401(k) plan with former employers or whose retirement plan has lost track of former participants with retirement accruals.

The DOL is hopeful that the lost and found search tool will help participants and beneficiaries locate their money more quickly and more efficiently, helping plans reduce their missing participant counts, a news release said.

Grieb explained that Congress intended for the DOL to work with the Secretary of the Treasury to populate the database from an existing filing of Form 8955-SSA, titled “Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits.” However, the Internal Revenue Service (IRS) determined it could not legally share Form 8955-SSA data with the DOL and the SECURE 2.0 Act did not expressly permit the IRS to share Form 8955-SSA filings with the DOL. To overcome this challenge and move forward with populating the database, the DOL issued a notice of proposed information collection, asking plan administrators to voluntarily provide the requested information. The proposed missing participant data would be filed separately (to maintain confidentiality) at the same time as Form 5500 (which is plan-level data that is publicly available).

Under the proposal, plan administrators would be permitted—but not required—to submit information such as names and Social Security numbers to the DOL for the following categories:

• Separated vested participants
• Former participants who were subject to “force out” distributions of small balances (the current threshold is below $7,000)
• Former participants for whom the plan purchased pension risk transfer annuity. 

The DOL proposed collecting additional data beyond what is required by Form 8955-SSA. The DOL asked for voluntary submission by plan administrators of the following information:

• Employer EIN, address and phone number
• Plan name
• Administrator name
• Participant name, date of birth, address, email, phone number and Social Security number
• Nature and amount of benefit as well as whether the benefit was paid
• Beneficiary information
• Location of benefit if not with the plan (e.g., insurer name or IRA custodian name)
• Identification of any separated vested participant of normal retirement age or older owed a vested benefit as well as those who have been unresponsive to plan communications about their vested benefits or whose contact information the plan has reason to believe is no longer accurate.

“Based on its experience with the missing participant program, the Department believes this additional data may increase the efficiency and effectiveness of locating missing participants,” the proposal notice said. Grieb pointed out that plan administrators might not have all the above data.

Plan Sponsor Considerations: Retirement Savings Lost and Found

• Decide whether the plan will voluntarily submit information. The DOL asked plan administrators for significant information dating back to when the plan became subject to ERISA, Grieb noted.
• Voluntary submission would benefit the retirement plan in the event of a missing participant audit and would help former employees connect with their money.
• Uncertainties include final data parameters, cybersecurity measures, and potential future guidance or regulatory action. Plan sponsors should watch for any guidance that impacts the voluntary nature of data submission as proposed.

2. Automatic Portability Transactions

When workers leave jobs with a retirement benefit valued at $7,000 or less, their plan can automatically rollover their benefits to an IRA if the plan document allows it and the employee does not act after receiving required notices. Auto-portability transactions involve automatically transferring a worker’s retirement savings from their IRA to their new employer’s retirement plan. The goal of automatic portability transactions is to help workers keep track of their retirement savings accounts, keep retirement accruals together and improve retirement security by reducing cash-outs when they change jobs, according to a news release.

The SECURE 2.0 Act allows a retirement service provider to receive a fee in connection with executing an automatic portability transaction. The DOL issued proposed rules establishing conditions for prohibited transaction relief. The overall terms and details of an automatic portability framework would be documented in contracts with recordkeepers, plan sponsors and the automatic portability provider, the proposed rule states.

A comprehensive automatic portability framework includes the following three key components:

1. The “transfer-out” plan that initiates a mandatory distribution of the former employee’s retirement balance
2. The IRA established to receive (via a rollover) and hold the distributed funds
3. The “transfer-in” plan that receives the roll-in distribution from the IRA when an IRA owner is matched with an account in an eligible employer-sponsored plan at a new employer.

The DOL’s position is that the third component—to roll in funds from an IRA to the transfer-in plan—is optional. In other words, the transfer-in plan must permit such roll-ins, and each plan sponsor will have to decide for itself whether to accept roll-ins, Grieb explained.

Through contractual agreements, an automatic portability provider must have access to records for the IRA and a sufficient transfer-in plan to make a match. The general concept of “locate, match and transfer” involves making queries of cooperating recordkeepers’ systems to determine if an IRA owner has become a participant in a new employer plan (i.e., the transfer-in plan).

Plan Sponsor Considerations: Automatic portability

• Decide whether the plan will accept roll-ins from auto-portability providers.
• Transfer-in plans would have a fiduciary duty to ensure fees are reasonable, the auto-portability provider is meeting disclosure requirements and cybersecurity protections are sufficient.
• If finalized as proposed, transfer-in plans would require a “plan official” to monitor transfers.
• Review all contracts with service providers.

3. Giving Investment Advice for a Fee: Amended PTE2020-02

The DOL final retirement security rule is expected to have the greatest impact on financial services, particularly insurance companies and professionals who sell annuities, Grieb said. The DOL has finalized amendments to several existing exemptions intended to ensure all retirement investors receive the same quality investment advice, regardless of the product or service they receive, per a DOL fact sheet. PTE 2020-02 is broadly available for advice with respect to investments recommended to retirement investors. Insurance companies and independent agents that give investment advice for a fee would have to satisfy the exemption’s conditions, which include care and loyalty obligations, impartial conduct standards and a written fiduciary acknowledgment.

Plan Sponsor Considerations: Investment Advice for a Fee

This is a sea change for those who sell annuities; however, many investment advisors who work with retirement plan sponsors already give advice that is in a client’s best interest and acknowledge fiduciary status in compliance with the Securities and Exchange Commission (SEC) Regulation Best Interest (Reg BI), Grieb said.

SEC Reg BI established a standard applicable to broker-dealers when recommending any securities transaction or investment strategy involving securities to retail customers. The DOL aligned the standards and requirements of the retirement security rule with SEC Reg BI. For that reason, investment professionals and financial institutions that are already complying with the SEC’s standards should readily be able to adapt to the requirements of the new rule and PTE 2020-02, the DOL fact sheet said.

Fiduciaries and plan sponsors could expect new written disclosures. Always review disclosures from service providers, Grieb recommended.

Learn More

Members can access the recording to learn more about how the concept of a fiduciary is going to expand under the DOL final rule. The International Foundation is watching for new developments on the proposals for retirement savings lost and found database and automatic portability.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.