Res Ipsa Loquitor
DOL Issues New Guidance on
Locating Missing Participants
By Marcia Wagner | Wagner Law Group
T
he U.S. Department of Labor (“DOL”)
has provided new guidance to plan
fiduciaries of terminated defined contribution
plans for locating missing or unresponsive
participants in order to distribute their
benefits. The guidance, which comes in the
form of Field Assistance Bulletin (“FAB”)
2014-0, replaces the prior guidance provided
in FAB 2004-02.
FAB 2014-01 outlines the mandatory
steps that plan fiduciaries must take to
discharge their duty to locate missing
participants and provides acceptable options
for distributing a benefit when participants
remain unresponsive.
Background. The inability to locate and
make distributions to participants when
terminating a retirement plan can present
several quandaries for plan fiduciaries,
including:
•
Delaying the filing of the plan’s final
Form 5500. All plan assets must be
distributed from the plan’s trust before
a final Form 5500 can be filed.
•
Voiding a favorable determination
letter issued by the Internal Revenue
Service (“IRS”) in relation to the
plan’s termination. In order to rely
on an IRS determination letter, a
plan administrator must make final
distributions within a reasonable time
following the plan termination.
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•
The Internal Revenue Code’s mandate
that fiduciaries must seek affirmative
direction from plan participants when
making termination distributions.
Prior Guidance. To address these concerns,
in 2004 the DOL released FAB 2004-02.
FAB 2004-02 provided plan fiduciaries with
guidance on how to meet their obligations
under ERISA to locate and distribute benefits
to missing participants in the context of a
defined contribution plan termination. FAB
2004-02 advised plan fiduciaries to use
the following methods to locate missing
participants:
•
Send notices by certified mail;
•
Review related plan and employer
records;
•
Contact the participant’s designated
beneficiary; and
•
Use the letter-forwarding services of the
IRS or Social Security Administration
(“SSA”).
Internet search tools, commercial locator
services and credit reporting agencies were
also recommended as search resources.
FAB 2004-02 relied heavily on the IRS
and SSA letter-forwarding programs. Both
of these programs, however, were recently
discontinued. (The SSA program ended
in May of this year, and the IRS excluded
retirement plans from its program effective
August of 2012.)
DOL Safe Harbor Regulations. In 2006,
DOL issued regulations to provide fiduciaries
of terminating defined contribution plans
with “safe-harbor” procedures for making
distributions to participants who do not
affirmatively request distributions. (See
ERISA Regulation Section 2550.404a-3.)
These regulations specify the content and
manner for providing notice to missing
participants, as well as various options for
distributing an unresponsive participant’s
account balance. Distribution options
include transferring the participant’s account
balance to:
•
an interest bearing bank account;
•
an individual retirement account
(“IRA”) in the participant’s name; or
•
the unclaimed property fund of the
state in which the participant was last
known to reside.
FAB 2014-01. FAB 2014-01, which
supersedes FAB 2004-02, reflects certain
changes that have occurred over the last
decade, including the expansion of internet
search tools and the discontinuance of the
IRS and SSA letter forwarding programs.
Similar to the prior guidance, FAB 201401 requires plan fiduciaries to take certain
steps to locate missing participants in a
terminated defined contribution plan and
outlines certain additional steps that, in
the DOL’s opinion, plan fiduciaries must
consider to fully discharge their duties
under ERISA.