Missing participant guidance helpful, but ...

Newly issued guidance from the Department of Labor offers retirement plan fiduciaries a list of best practices for locating missing participants and insight into how it approaches investigations on the matter, but left stakeholders wanting more and expressing concerns about the process.

"It's nice that the department released a list of things that they've identified as best practices, but it's frustrating that they haven't linked it to the statute of ERISA, it's frustrating that it comes after seven years of investigations, and it's frustrating that even after all of this they couldn't put together a road map that says, 'We understand that not everybody is going to be found, but we don't want plan fiduciaries spinning their wheels for days and hours trying to figure out what to do,'" said Kevin Walsh, a Washington-based principal at Groom Law Group.

The Labor Department issued three pieces of guidance related to missing participants on Jan. 12, including the list of 27 best practices it said retirement plan fiduciaries should consider in helping reduce missing participant issues. The steps include maintaining accurate census information for the plan's participant population; implementing effective communication strategies; conducting missing participant searches; and documenting those procedures and actions. Before the new guidance, the Labor Department had no outlined process for plan sponsors to follow.

The guidance is a "good first step," said Aliya Robinson, senior vice president of retirement and compensation policy at the ERISA Industry Committee in Washington, but she remains concerned that list of best practices will become "a checklist that auditors look at to see whether or not plan sponsors have done" them all.

Bradford P. Campbell, a Washington-based partner for Faegre Drinker Biddle & Reath LLP and former assistant secretary of labor for the Employee Benefits Security Administration during President George W. Bush's administration, said the guidance is helpful, but "it's not quite what people had hoped in that it's not a, 'Here's what you should do to be in compliance.' It's much more principles-based and not a check-the-box type of guidance."

Michael P. Kreps, a principal at Groom Law, also in Washington, said the guidance is a "good summary of a lot of the positions that the department has taken in investigations over the past six or so years," but will be "disappointing to plan sponsors who wanted more clarity as to exactly what they need to do. It's a big laundry list of best practices, but it doesn't tell you which ones you need to do to meet your fiduciary obligations; it's more of a facts and circumstances test."

The best practices list will still lead to uncertainty among plan sponsors when searching for missing participants, stakeholders said.

Will Hansen, Arlington, Va.-based executive director of the Plan Sponsor Council of America and chief government affairs officer at the American Retirement Association, said he'd like a "legislative or regulatory solution that states that the plan sponsor must do X, Y, Z in attempting to locate a missing participant and once they have completed those steps the burden then shifts to the individual. That is more of a definitive process."

The best practice list gives "us something to work with and improve upon," said Tim Rouse, executive director at the Simsbury, Conn.-based SPARK Institute, which represents retirement industry players such as record keepers.

Mr. Rouse wasn't expecting the Labor Department to issue specific guidelines to which plan fiduciaries and their record keepers would adhere. "The DOL doesn't want this to become a simply checking-the-box process, and if there was a specific set process the fear is that people would just do the minimum and be done," Mr. Rouse said.

The Labor Department outlined 10 ways plans should search for missing participants, including checking related plan and employer records for participant, beneficiary and next of kin/emergency contact information; attempting contact via other available means such as email addresses, telephone, text and social media; and reaching out to the workforce by publishing a list of missing participants on the company's intranet, in email notices to existing employees, or in communications with other retirees who are already receiving benefits.

Ms. Robinson and Mr. Hansen raised concerns over some of the department's best practices, such as using Google searches or social media to locate individuals. "For a big employer, searching for a common name can send you down a rabbit hole," Ms. Robinson said.

Human resources departments, which typically handle missing participant inquiries for employers, are hesitant to use social media in their endeavors for similar reasons, Mr. Hansen said. "We know auditors are asking" plan sponsors if they use social media in their searches, and "now the fact that it's included in the document I think does memorialize that procedure within an audit," he added.

Moreover, Mr. Kreps took issue with another suggested best practice: reaching out to a missing participant's former colleagues. "Not only are there privacy concerns and fraud concerns but there are resource limitations, and you can only do so much," he said.

Added Ms. Robinson: "We still are a little cautious about that list, and I think that's something we will continue to have ongoing conversations with the agency about."

Also included in the Jan. 12 guidance package was an outline of the general investigative approach for EBSA's regional offices under its Terminated Vested Participants Project, which encompasses missing participants.

Of the $2.6 billion EBSA recovered in enforcement actions in fiscal year 2020, roughly $1.5 billion was from its TVPP. That number was in line with the $1.5 billion the project recovered in 2019 and above the $808 million recovered in 2018.

When opening TVPP investigations, the Labor Department said it focuses on plans that appear to have systemic issues with plan administration, particularly issues related to keeping track of terminated vested participants and beneficiaries, and timely distribution of benefits.

The information officials ask for during such probes include plan documents; participant census records; the plan's procedures for communicating with participants, spouses and other designated beneficiaries; and information to determine whether the plan has taken sufficient steps to address missing participant situations when they occur.

Mr. Campbell said the description of the enforcement process seemed more about collaboration rather than penalizing plans, but he expects missing participant investigations to remain a focus in the coming years.

But with a new administration in office, is the posture "going to be one of compliance assistance for good actors and enforcement for bad actors? Or is it going to be as we heard during the Obama administration, 'There's a new sheriff in town and by golly we're going to enforce,'" Mr. Campbell asked.

The last piece of the guidance package was a field assistance bulletin that authorizes — as a matter of enforcement policy — plan fiduciaries' use of the Pension Benefit Guaranty Corp.'s missing participant program for missing or non-responsive participants' account balances when they are terminating defined contribution plans.

Mr. Campbell expects the Biden administration to keep the new guidance in place. "This guidance is the kind that's unlikely to be on the chopping block because it's not really making big policy pronouncements; it's basically talking about how the department is expecting to see things and an ongoing enforcement push," he said. "This strikes me as the kind of guidance that likely would be modified down the road rather than subjecting it to recission or elimination by the incoming administration."