DOL Investigating Plans that Fail to Locate Terminated Vested ParticipantsBondBeebe
Larry Beebe, CPA
The Department of Labor (DOL) recently announced a new initiative to investigate the adequacy of Defined Benefit Plans procedures to locate and pay out benefits to terminated vested participants. DOL believed that many Plans do not have adequate systems to identify and pay terminated vested participants when they reach either the Plan’s normal retirement age or the IRS required minimum distribution age of 70 ½.
The failure to take action to identify, locate and pay terminated vested participants can be considered a breach of fiduciary duty, which could lead to personal liability of Plan trustees.
Normally this situation occurs when a Plan participant terminates employment and then moves without notifying the Plan. Often the participant forgets that he or she has a benefit coming from the Plan.
DOL has not specified exactly what steps a Plan should take in locating missing participants. DOL Field Assistance Bulletin 2014-01 says, however, that before abandoning efforts to find a participant, the Plan trustees at a minimum should:
- Use certified mail
- Check related Plan records
- Check with Plan beneficiaries, and
- Use free electronic search tools
The field assistance bulletin further suggests additional steps may be in order, such as internet search tools, commercial location services, credit reporting agencies, information brokers, and investigation databases.
Clearly the DOL expects the Plan to have a plan to locate terminated vested participants and show that the Plan is operating as the documents call for.
Having your CPA and/or your attorney review that plan and its operations is an additional prudent step.