While the defined contribution plan industry awaits more formal guidance from Washington on how to combat the issue of missing, terminated participants in active retirement plans, some sponsors and service providers already are working to refine and expand on existing practices for locating participants with stale addresses.
Rising workforce mobility, the growth of automatic enrollment and a more aggressive stance by Department of Labor auditors on the efforts that sponsors should take to find missing participants, among other factors, have made the task of finding missing participants more demanding.
One possible solution to the missing participant issue being explored by Retirement Clearinghouse LLC involves linking record-keeping systems to create a virtual database of participant records to locate former employees who have valid addresses on file with their new employers.
Spencer Williams, CEO of the Charlotte, N.C.-based firm, said the solution, which RCH refers to as "auto locate," emerged after a February survey showed two-thirds of participants who have an active account with their current employer also have a separate retirement account with a former employer.
The February survey, conducted by Boston Research Technologies in collaboration with RCH, incorporated responses from 1,000 individuals who had participated in a least one employer-sponsored retirement plan in the past, the majority of which were DC plans.
Mr. Williams said RCH is working on getting record keepers to participate in the network.
Until then, RCH continues to offer stand-alone missing participant searches for plan sponsors and record keepers, which start at $2.50 per participant account, Mr. Williams said.
Resources used by RCH in those searches include the U.S. Postal Service's National Change of Address database; LexisNexis, a database of legal and public records; credit reporting agency Experian; social media; and certified mail.Mr. Williams believes it is "incumbent" on the private sector to find solutions to combat the missing participant problem. According to the firm's February survey, 11% of terminated participants had a stale address.
In general, the federal government has trended away from providing information to help locate missing participants, Mr. Williams said, pointing to the discontinuation of the IRS' letter-forwarding program in 2012 as an example. The program, which the Social Security Administration also offered and also eventually dropped, helped plan administrators locate missing participants by attempting to forward letters to missing individuals on administrators' behalf.
Reasons provided for the termination at the time were the availability of electronic resources and locating firms, as well as federal budget constraints.
Guidance from Washington on how active plans should deal with missing participants is also "incomplete," said Neal Ringquist, executive vice president of sales and marketing at RCH.
In a letter to Deputy Assistant Secretary of Labor Timothy Hauser in October, the American Benefits Council requested the DOL issue guidance on the steps active plans must take to locate participants before and after funds must be disbursed from participants' accounts. (In 2014, the DOL issued guidance for missing participants in terminated defined contribution plans.)