The Department of Labor is increasing its audits of defined benefit pension plans withso-called “missing” participants, thereby pressuring plan administrators to find formeremployees—or their beneficiaries—so that the benefits they’re owedcan be distributed to them.

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The Society for Human Resource Management reports that, according to Norma Sharara, a principal inMercer’s employment practices risk management group in Washington,D.C., this is something “completely new” that started in the DOL’sPhiladelphia office as a pilot project last year and is now goingnational.

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Related: Quiz: 401(k) plans and compliance

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Sharara says in the report that the Philadelphia DOL officebegan reviewing the Forms 5500 of defined benefit plans to identifyemployers with a high number of terminated vested participants whowere not receiving payments and who had not received a lump-sumpayout.

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When officials contacted plan sponsors and asked for names andaddresses of these participants, “the sponsors said they weremissing,” Sharara says in the report, adding that when thePhiladelphia DOL sent a certified letter to the participants’last-known addresses, “a lot of participants responded” and saidthey “hadn’t known money was waiting for them in a pension plansomewhere.”

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She also says that from October 2016 to August 2017, thePhiladelphia DOL recovered more than $165 million in benefits thatshould have been paid to participants.

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The program, now going national, has auditors looking for plansponsors’ failures to locate and contact missing participants; oncefound, those failures will be treated as a breach of fiduciary dutyunder the Employee Retirement Income Security Act, which cantrigger substantial penalties.

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“The DOL thinks that fiduciaries can’t do what they’ve alwaysdone, which is to pretty much wait for participants to file aclaim,” Sharara says in the report, adding, “Instead, you have anaffirmative duty to proactively contact participants in advance ofbenefit start dates. The DOL is saying that plan fiduciaries couldbe personally liable to pay participants their missedbenefits.”

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Plan sponsors should bolster their efforts to find participants,the report says. Timothy Hauser, acting director of the DOL’sEmployee Benefits Security Administration, has announced that therewill soon be new guidance regarding standards that plan sponsorsshould follow, and at the Aug. 24 meeting of the ERISA AdvisoryCouncil in Washington, D.C., listed four steps plan sponsors shouldtake until the guidance is released.

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They should send plan participants a certified letter usingtheir last known address, maintain good records on efforts to reachterminated vested participants, contact coworkers of terminatedvested participants to try to find updated contact information andtry contacting missing participants through their phonenumbers—since many people keep their cellphone numbers even aftermoving to a new location.

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They can also try using a commercial locator service, but theyhave a fiduciary duty to monitor the locator service’s efforts.

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And last but not least, they should follow all filing rules forIRS Form 8955-SSA, Annual RegistrationStatement Identifying Separated Participants with Deferred VestedBenefits. The initial filing is due no later than the pensionplan’s Form 5500 due date for the plan year following the plan yearin which the participant ended employment, if benefits haven’tstarted by then. Subsequent filings are required if errors arediscovered in information previously reported or if theparticipant’s benefits are transferred to a successor plansponsored by a different employer, for instance.

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