There’s that email from Accounts Payable: Mrs. Jones’ pension check is uncashed. Again. But no one knows why — she’s a missing participant. This kind of scenario, which is widespread, was the grist for a discussion at the SPARK Institute’s recent national convention held at National Harbor, MD.
Why Do Participants Go Missing?
So what makes a missing participant? When does one become one? How are they — for lack of a better term — identified?
Personal Circumstances. Mark Sweatman, President, Retirement Plan Management Services, RCP Solutions, noted that employees can be “missing” due to changes in their personal circumstances. For instance, an employee who is no longer with the employer may have moved from the last residence known when he or she left employment with the firm sponsoring the plan. This could be for a variety of reasons:
- name change;
- moving to a nursing home; or
Unopened Mail. Sweatman said that in some circumstances, an employee may seem to be missing, but “they are not missing in the sense many think of it.” Rather, he said, “They’re just not answering their mail.” Terry Dunne, Senior Vice President and Managing Director, Millennium Trust Company, agreed. “Millennials don’t pay attention to the mail,” he said. Another reason mail may be unopened, said Sweatman, is the change in a corporate name that results from a corporate takeover — they receive mail from a different company than the one for which they had worked, and consequently treat it as junk mail and dispose of it.
Lack of Instruction. Sweatman said that some employees may ignore communications and correspondence concerning their retirement accounts because their employer never educated them about the fact that they are participants in the first place, let alone what it means for them that they are participants — making it unlikely that they would pay attention to communications, including mail, about the plan.
Deliberate Disappearance. Some participants may not be missing inadvertently, as a side effect of something else — some may want to hide their identities and even disappear. “There are many reasons why people may not want you to contact them,” said Sweatman, including family disagreements and participating in s witness protection program.
Missing participants are more than a passing irritation. Aside from the financial complications uncashed checks create, there are factors that accentuate the effect of missing participants.
The Department of Labor (DOL) and its role is looming in the background, Sweatman and Dunne suggested. Sweatman said that it appears to him that the DOL seems to think that a plan “can get every single person to update their address.” And this view is even more important given that Dunne observed that “it may be accurate to say that there is no comprehensive guidance” from the federal government regarding missing participants. And Dunne also offered a broader view, remarking that increasing longevity makes it important to make sure as many people as possible participate in plans.
Addressing the Issue
The key to addressing the problem of missing participants — both finding them as well as reducing the likelihood that there will be more in the future — is finding a repeatable, reliable process that can be used regularly, Sweatman said. He added that it should be cost-effective, and noted that some missing participants’ balances are low. “It doesn’t make sense to spend $25 to contact a missing participant with a $5 balance,” he said.
But it is possible to go too far in seeking to control expenses in addressing the problem. For instance, Sweatman and Dunne noted that while it is possible to conduct searches on the Internet for free, that is far from a panacea.
Such searches are not helpful when trying to gather information about a person with a very common name — and that is especially true in highly populated areas, Sweatman said. Sweatman and session moderator Gayle Rollins, Assistant General Counsel for AIG Consumer, also warned that free online searches could run afoul of privacy concerns. And that concerns not only the search itself and what it may disclose; it also concerns the risk of violating a missing participant’s privacy by contacting someone with the same name. “What happens if you send the information to the wrong John Smith?” asked Sweatman.
Communication is a powerful tool in heading off the disappearance of a participation, Dunne and Sweatman indicated. “Communication is always critical,” said Dunne, suggesting that when a participant terminates employment, he or she should be given information about how to stay connected with the company. And he also advocated providing information electronically and through a web-based platform, cautioning that it can be intimidating to participants to be given a stack of paper, and one that they may not understand at that. Sweatman added that one also can make sure that a participant gives permission for verification of their address.
Despite the challenges, the expense, and the regulatory ambiguities, Dunne said, “Doing nothing makes no sense at all,” while doing something that benefits participants “makes a lot of sense.”