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Missing and Unresponsive Participants in ERISA Plans: Current Challenges and Recommendations

November 22, 2019

In recent years, an issue under the Employee Retirement Income Security Act of 1974 (ERISA) has drawn considerable attention: Participants who have reached the minimum age for starting their retirement benefits are not doing so. This so-called “missing participant” issue arises when a retirement plan cannot locate these individuals or they are unresponsive to the plan’s efforts to encourage them to start payment. The issue of missing participants in ERISA plans has been the subject of investigations by the US Department of Labor (the Department) and the focus of other regulators, including the Internal Revenue Service. In light of this increased regulatory focus, plan sponsors may want to take steps to ensure that they understand their fiduciary duties regarding missing participants and the Department’s position on these duties.

A recent article in New York University Review of Employee Benefits and Executive Compensation, Missing and Unresponsive Participants in ERISA Plans: Current Challenges and Recommendations, provides background on this issue (including an overview of the Department’s investigations), identifies the governing legal standards under ERISA, describes many of the challenges for ERISA plans dealing with missing participants, and recommends that the Department issue guidance in this area (and provide practical suggestions for this guidance).

Key Takeaways

  • In recent years, there has been an upward trend in individuals not collecting retirement benefits upon reaching retirement age. Although there are many reasons individuals delay collection, some are not starting their benefit payments because they are “missing”—meaning the administrator of their retirement plan cannot locate them or the plan lacks critical identifying information to identify them, e.g., the participant’s Social Security number.
  • Other participants may not be “missing” and may even receive communications from the plan, but for some reason they have not elected to start payments—these participants are better thought of as “unresponsive” to the plan’s outreach efforts. Regardless of which category they fall into—missing or unresponsive—in failing to start their benefits at retirement age, these individuals are delaying the receipt of earned retirement funds. This phenomenon is also a concern for ERISA plan administrators because they are subject to fiduciary obligations to locate participants and pay benefits.
  • Although the precise number of missing participants is unknown, many factors contribute to the number of missing participants. Some factors include plans lacking complete or accurate records, the increasingly transient US workforce, privacy and administrative burdens in tracking and locating participants, and a lack of government resources to assist with missing participant searches.
  • The Department, retirement industry groups, and legal practitioners have focused on the issue of missing and unresponsive participants. ERISA plan administrators may need to take some level of action to attempt to locate missing participants and to assist participants (including unresponsive participants) with commencing their benefits.  
  • The Department has launched an investigatory initiative, and since around 2015, it has been conducting an enforcement initiative focused on ERISA’s fiduciary duties regarding the handling of missing and unresponsive participants. The Department takes the position that the duties of ERISA Section 404(a)(1) require that, “[c]onsistent with their obligations of prudence and loyalty, plan fiduciaries must make reasonable efforts to locate missing participants or beneficiaries, so that they can implement directions on plan distributions from the participants or beneficiaries.” However, there is little legal authority applying those general fiduciary standards to the context of missing and unresponsive participants.
  • Absent congressional action, there are several administrative solutions that could more immediately address the challenges of missing and unresponsive ERISA plan participants. The article identifies instructive and practical guidance the Department could provide on the duties of ERISA plan fiduciaries, specifically what steps a prudent and loyal plan administrator should take in searching for a missing participant (and addressing other missing participant challenges, such as record gaps) and in communicating with unresponsive participants.