After recovering more than $1.1 billion for thousands of missing participants in pension plans, the Labor Department is directing its regulatory firepower on defined contribution plans, a development that has many plan sponsors on edge.
"This is one of those enforcement policies that jumped up fairly quickly," said Bradford Campbell, a partner with law firm Drinker Biddle & Reath LLP in Washington. "It was borne out of DOL looking at defined benefit plans and now it's morphed over into defined contribution plans."
Mr. Campbell noted that questions about missing participants have come up in every investigation his clients have experienced over the past year — questions that weren't asked in the past.
While there are no publicly available statistics, lawyers and trade groups for plan sponsors have noted a marked uptick in the DOL's enforcement efforts regarding missing DC participants and much tougher rulings that sponsors claim are either inconsistent or unfair.
"The department has not been uniformly consistent across regional offices as to how it responds and what corrective actions it wants to see," Mr. Campbell said.
DOL's heightened enforcement activity comes in the wake of a pilot program it started in 2017 in the Philadelphia office of the agency's Employee Benefits Security Administration to address missing participant issues in pension plans. The program was expanded nationally in 2018 and has recovered more than $1.1 billion for more than 21,000 participants to date, according to the latest data from the DOL.
"It is incumbent on all employers with benefit programs to have proper record keeping and to ensure employees receive the benefits they earned," the Department of Labor said in a statement.
Preston Rutledge, assistant secretary of labor for EBSA, told attendees at the National Institute on Retirement Security conference on Feb. 26 that the Labor Department is focused on missing participants and is working on "sub-regulatory guidance" for plan sponsors. The issue "is very much on our radar screen," Mr. Rutledge said in remarks published by BenefitsPRO.
The increased scrutiny also comes as the first generation of workers dependent on 401(k)s retires. Making sure they get their benefits out of their plans has taken on greater urgency with the DOL, said Fred Reish, a partner with Drinker Biddle in Los Angeles.
While the DOL's renewed investigatory zeal has many sponsors worried, those running ongoing plans are especially concerned because they haven't received explicit guidance as to what they must do to meet their fiduciary obligation to find missing participants or how to handle their required distributions. The DOL provided such guidance to sponsors of terminating plans in a field assistance bulletin in 2014 but has remained mum with regard to ongoing plans.