The challenges surrounding missing participants are growing. A recent Plan Sponsor Council of America (PSCA) webcast outlined what that means for plans and what plan sponsors and administrators can do to meet those challenges.
In “Missing Participants: Latest on DOL Audits of Retirement Plans,” David Levine, Kevin Walsh and Brigen Winters, all Principals at Groom Law Group, discussed trends affecting and surrounding missing participants, as well as strategies for addressing issues that arise because of them.
Where We Are
The number of missing participants is increasing. Levine, Walsh and Winters attribute this to three factors:
- The number of missing participants “has kicked in greatly in recent years,” said Winters, largely due to Baby Boomers retiring.
- The workforce has become more mobile.
- Mergers and acquisitions have had an effect on plans and the ability to locate former employees and missing participants.
That increase has a variety of consequences, among them an increase in investigations by the Department of Labor (DOL) to find out what plans and employers are doing to find lost participants and reunite them with their money, and help make sure that happens.
DOL Investigations
The DOL investigations of defined benefit plans began in Philadelphia in 2014, Winters said, and expanded the initiative nationwide. The initiative “has been perceived as an enforcement ‘win’,” he said. Winters reported that the initiative has recovered greater amounts in the three previous years:
| Fiscal Year | Amount Recovered | Change from Previous Year |
| 2017 | $326.0 million | -- |
| 2018 | $807.7 million | +$481.7 million |
| 2019 | $1.5 billion | +692.3 million |
Winters added that the DOL investigations are expanding beyond DB plans to defined contribution plans as well.
Investigation Mechanics
Walsh outlined the typical steps in a DOL investigation:
- initial document request to plan sponsor or a phone call requesting a site visit
- request for interviews and depositions, and follow-up requests
- investigator writes an internal report to supervisors
The following steps can take place in any order, Walsh said, and are ways in which an investigation “can go off the rails”:
- DOL Employee Benefits Security Administration regional director issues either one of two letters—10-Day or No-Action—to the target of the investigation, or does nothing
- sending mailings to a sample of participants
- check-ins of located participants
Timing of investigations can be a bit nebulous, the speakers indicated. There is no definitive deadline for their completion, they said, and one should “expect long periods of inactivity.” There also is no requirement that the DOL identify the target, scope, origin or end of an investigation. And, they add, Section 413 of ERISA stipulates that any civil action must be filed no later than six years after violation occurred or, if earlier, three years after the DOL has actual knowledge.
Responding to an Investigation
The speakers outlined how one should respond to a DOL investigation:
- Notify attorney, plan administrator, valuation advisor.
- Notify insurance broker if fiduciary liability policy is in place.
- Assign one or two company officials to deal exclusively with investigator
- Have counsel contact DOL and move any meetings/interviews offsite
- Address confidentiality needs
- Retain copies of documents produced
- Memorialize all unwritten communications
- Provide no more information than is requested
Be cooperative, the speakers suggested, but also firm in protecting rights. Many concerns, they noted, can be corrected without costly penalties; however, serious ERISA violations may require a settlement agreement. But Levine advised caution, remarking, “Settlement agreements aren’t your friend all the time.”
Guidance
The ERISA Advisory Council identified the problem of missing participants as one for which guidance was needed, Winters said, and the speakers noted that there has been some guidance. For instance, the DOL issued Field Assistance Bulletin 2014-01, which lays out steps to be taken before abandoning the search for participants in a terminating DB plan; however, they said, the DOL approach under this guidance doesn’t always agree with the IRS approach. They were much more positive about IRS Revenue Procedure 2015-27, which sets forth corrective procedures for plans, calling it “a good solid foundation about looking for missing participants.”
But the speakers suggest that more guidance concerning missing participants is needed for ongoing plans and for DB plans. And Levine called for more clarity, remarking, “The challenge we face is having clear standards.”
Not only that, the speakers noted, President Trump in 2019 issued the Executive Order on Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication. “We can build on this executive order,” said Walsh, adding that it is “time to signal to DOL that they are party to this executive order.”
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