ML BeneBits

The US Department of Labor’s (DOL’s) position on the appropriateness of environmental, social, and governance (ESG) investing strategies in ERISA-regulated retirement plans has ping-ponged for decades (as we’ve covered previously). A recent statement from Trump administration attorneys in a lawsuit challenging a Biden-era regulation on the topic indicates that the ball is likely sailing back to the other side of the table and specifically to a posture that is largely skeptical that ESG investment factors can comply with ERISA’s fiduciary duties.

The US Department of Labor recently issued Field Assistance Bulletin (FAB) 2025-01, a temporary enforcement policy regarding the transfer of small retirement plan benefits to state unclaimed property funds. This development is part of the agency’s broader effort to help fiduciaries fulfill their obligations under ERISA to ensure participants and beneficiaries are located and receive their retirement benefits.

Temporary Enforcement Policy

As we noted in our previous LawFlash, the DOL was directed under SECURE 2.0 to establish a Retirement Savings Lost and Found to allow a participant (or beneficiary) to search for contact information for plan administrators of plans in which the participant (or beneficiary) may have a benefit. The DOL ultimately did establish a searchable Retirement Savings Lost and Found database, but submission of information to the database remains voluntary, and its utility remains questionable.

The FAB represents another step—one that will be much more useful—in helping participants (and beneficiaries) locate and obtain their plan benefits. Under the FAB, and pending the DOL’s issuance of further guidance, the DOL indicates that it will not pursue violations of fiduciary duties related to the transfer of benefits with a present value of $1,000 or less (including uncashed checks) owed to a missing participant (or beneficiary) to an eligible state unclaimed property fund provided that certain conditions set forth in the FAB are satisfied.

For purposes of determining whether the present value of a benefit does not exceed the $1,000 threshold, the fiduciary is directed to disregard any plan loans but to include any rollover contributions to the plan.

In order to qualify for relief provided by the FAB, the plan fiduciary must satisfy the following conditions:

• The fiduciary must have determined that the transfer to a state unclaimed property fund is prudent for the benefit owed to the participant or beneficiary.
• The fiduciary must have implemented a prudent program for locating missing participants consistent with DOL’s Missing Participants – Best Practices for Pension Plans (on which we previously wrote).
• The state unclaimed property fund that is selected must be the one offered by the state of the participant’s (or beneficiary’s) last known address.
• The plan’s summary plan description must describe the transfer of the benefits of missing participants (or beneficiaries) to a state unclaimed property fund, and the summary plan description must also identify the name, address, and phone number of a plan contact who can answer questions about where the funds may be transferred.
• The state unclaimed property fund must qualify as an “eligible state fund,” meaning it
  • acts as custodian and allow claims to be made in perpetuity, regardless of when the funds are received by the state;
  • must not charge any fees or other charges that will result in the payment of less than 100% of the amount transferred to the state fund;
  • has a free, searchable website that reliably shows the name of the participant or beneficiary and plan name and permits electronic claims;
  • provides an ability to make inquiries by physical mail, electronic mail, and telephone;
  • “participates in the National Association of Unclaimed Property Administrators’ MissingMoney.com website or a similar non-commercial unclaimed property database operated under the auspices of the National Association of State Treasurers, Inc.”;
  • affords a streamlined process for small claims of $1,000 or less;
  • diligently searches, at least annually, for updated addresses of participants and beneficiaries who are owed more than $50 and provides written notice to the owner that the state is holding the individual’s money upon obtaining an updated address;
  • allows the plan to pay the participant or beneficiary directly and obtain reimbursement of transferred amounts from the state; and
  • “participates in the States’ Unclaimed Property Clearing House, as operated by the National Association of State Treasurers, Inc.”

A plan fiduciary can rely on a representation from the state treasurer that a fund is an eligible state fund unless the fiduciary has actual knowledge to the contrary.

Observations

This guidance may be particularly helpful in the context of uncashed checks (e.g., amounts that have been involuntarily distributed or trailing distributions that go uncashed). However, plan fiduciaries should think carefully and consult with counsel about whether escheatment makes sense under various scenarios. It may also take some time for state treasurers to prepare to make the necessary representations, or for plan fiduciaries to conduct the necessary diligence if these representations are not available.

How We Can Help

Morgan Lewis lawyers stand ready to assist plan fiduciaries and administrators on questions related to missing participants and uncashed checks and application of the FAB.

If you need assistance with any of the above or have any other questions on the FAB, please contact your Morgan Lewis contact(s).

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