A more aggressive stance by Department of Labor auditors on how hard plan sponsors should try to find missing terminated vested participants is raising the call for more formal guidance, and forcing plan executives to pay more attention until it comes.
"There's enough chatter and confusion that it would be good to have a set of guidelines and best practices," said Dennis Simmons, executive director of the Committee on Investment of Employee Benefit Assets in Washington, whose members are chief investment officers at 104 large companies responsible for nearly $2 trillion in retirement assets. "Our members have every incentive to make sure participants get their benefits. No sponsor wants to not find these folks; it's just a practical issue."
It is a lesson that MetLife Inc. learned the hard way late last year.
Aware of the DOL's new emphasis on finding missing participants, the company reviewed its practices and discovered it had lost track of an estimated 13,500 participants, or about 2% of its pension risk transfer population, which forced it to increase reserves up to $525 million and to reduce earnings. In an 8-K filing last month, MetLife said missing participant practices established 25 years ago and management controls were "ineffective."
The DOL started a pilot program to address the missing participants issue in 2016 in the Philadelphia office of the agency's Employee Benefits Security Administration. That has since expanded across the country, with notable results. In fiscal year 2017, the DOL recovered $326.7 million for plan participants, and the tally is $114.6 million so far in fiscal 2018, according to agency data.
Calls to sponsor advocacy groups from plan executives have ramped up correspondingly.
"We continue to hear from (plan executives)," said Jan Jacobson, senior counsel for retirement policy with the American Benefits Council in Washington. "A lot of (DOL) auditors are saying, 'You need to do more' — there are a lot of different things that I have heard them asking for."
In a letter to Deputy Assistant Secretary of Labor Timothy Hauser last fall requesting formal rule-making on comprehensive guidance for plan fiduciaries, the council noted its members have encountered "inconsistent and alarming" positions taken by DOL auditors during routine examinations. Some auditors said that failure to find a missing participant was a breach of fiduciary duty, or forfeiting funds back into a plan until participants are found is a prohibited transaction, and plan sponsors could be penalized. Auditors also have insisted that sponsors try different search methods every year or reach out to friends and former colleagues of the missing participant or through social media. Some plan sponsors have been told they must do "whatever it takes" to find participants who are missing or not responding to communications.