Over a billion dollars in retirement plan assets was recovered by the Department of Labor in 2020 alone. New guidance clarifies the obligations of plan sponsors related to ensuring participants receive their benefits.
Missing and Nonresponsive Plan Participants
Sometimes workers lose track of the employer-sponsored retirement accounts—and lose out on funds intended for themselves and their beneficiaries. Let’s say, for example, an employee is terminated from a job and has accrued enough to keep assets in the plan, but does not know it. This is an example of a common “missing participant” case according to RPA Convergence.
Retirement plan experts, including the ERISA Industry Committee, have long pressed the Department of Labor to provide guidance to plan sponsors about what to do in the case of missing or nonresponsive plan participants. With DOL investigations turning up assets presently valued at $1.4 billion on behalf of missing and non-responsive participants in 2020 alone, it is clearly important for plan sponsors to understand what constitutes appropriate action so that all workers and their beneficiaries receive the promised benefits.
DOL’s Guidance For Plan Fiduciaries
The DOL’s Employee Benefits Security Administration (EBSA) is instructing retirement plan fiduciaries to:
- Maintain complete and accurate census information.
- Communicate with participants and beneficiaries about their benefit eligibility.
- Implement effective policies and procedures to locate missing participants and beneficiaries.
The Society for Human Resource Managers reports that the guidance, issued in January 2021, comes in three parts. Taken together it provides: best practices for tracking and communicating with participants; compliance standards that are used in the event of investigation; and information about the appropriate use of the Public Benefit Guaranty Corp. (PBGC) Defined Contribution Missing Participants Program for missing or non-responsive participants’ account balances.
The three new areas of guidance from EBSA are available here:
Still Important!
It remains a DOL requirement for your retirement plan to have a current ERISA Bond—and this must be issued from a U.S. Treasury listed business, such as Colonial Surety Company. As a national leader in the field, Colonial can help you with the required ERISA Bond for the plan —and much more. We offer comprehensive coverage to help plan sponsor’s navigate the times at hand. Just select an affordable package and receive:
- The ERISA bond required toprotect the assets of the retirement plan from theft;
- Fiduciary Liability coverage to protect you and your assets from personal liability.
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach; and,
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Plain Language Is Always Appreciated
Best practices on missing participants remind us of the importance of clarity and persistence in efforts to track and communicate with plan participants. Guidance includes these points:
- Employers should use plain language to tell participants about their benefits, including the need to take required minimum distributions when applicable….
- When employees leave a company, the separation process should include getting updated contact information for the plan participant.
A Clear Reminder for Plan Sponsors
As a plan sponsor, understand: the ERISA bond required for the retirement plan protects the participants of the plan, but does not cover you—the plan sponsor— as the fiduciary.
Uniquely, Colonial’s ERISA bond packages offer plan sponsors up to $1,000,000 of fiduciary liability insurance. Our 2 or 3-year ERISA bond packages provide the greatest overall savings and protection. In addition to fiduciary liability coverage, you can add cyber liability insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber attack. Colonial even includes extended coverage to ensure your ERISA bond remains US Department of Labor compliant.
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