The Department of Labor has turned its attention to practices and procedures of plan sponsors in regard to locating and distributing benefits to missing participants. Plan sponsors should take note that the Department of Labor is taking a tougher position on fiduciary responsibilities for dealing with missing participants.
From some reports, the Department of Labor is claiming breaches of fiduciary duty for plan sponsors who fail to perform regular searches for those missing and unresponsive participants. Although there is a lack of guidance from the Department of Labor on the issue, those who are responsible for performing the required searches for missing participants should understand there is higher scrutiny coming from investigators and evaluate the adequacy of their current search methods.
Additionally, for missing participants who are required to start receiving required minimum distributions, it is important to know the IRS has a “non-enforcement policy.” Announced in October 2017, the IRS stated that auditors will not challenge a qualified plan for failure to make required minimum distributions to missing participants, but only when certain conditions have been met. Fiduciaries are required to perform at least three steps to locate missing participants:
Plan sponsors need to be aware of their compliance responsibilities and discuss how their role integrates with their third-party administrator’s and recordkeeper’s contracted role to avoid potential risk. Continued education on fiduciary responsibilities for locating missing participants is a necessary step. Our Eide Bailly Employee Benefits Audit Team is available as a resource.