Blue Ridge ESOP Associates Industry News

Missing Participants. What are you supposed to do?

Posted by Mark Swanson

Jul 20, 2022 9:30:00 AM

Hey Employee Owner - December 2017You’ve spent countless hours and who knows how much money to provide meaningful benefits through your ESOP and/or 401(k) plan only to find that when you want to distribute the benefits, you can’t find the participant or beneficiary(ies). Distribution forms and statements come back “return to sender – that address unknown.” E-mails are flagged undeliverable or perhaps most frustrating are the situations where the participant is just non-responsive. It’s as if you’re knocking on their door knowing they’re home but they just don’t answer. Hence the dilemma of what we’ll lump together as missing participants.

Under ERISA, plan fiduciaries have a duty of prudence and loyalty to participants to distribute plan assets. Plan fiduciaries need to take steps to find missing participants to fulfill their duties. The Form 5500 has a question “Has the plan failed to provide benefits when due under the plan?” If this is answered “Yes” the amount also needs to be disclosed and could act as a ‘flag’ for an examination by the Department of Labor (DOL). The DOL has issued additional guidance to assist fiduciaries in meeting their obligations to missing participants. Following are some highlights.


The guidance takes a three-prong approach, as follows:


  • DOL Best Practices for Locating and Tracking Missing Participants
  • DOL Temporary Enforcement Policy on Fiduciaries of Abandoned Insolvent Plans, and
  • Compliance Assistance Release Describing DOL Missing Participant Investigations.


The Compliance Assistance Release is mainly focused on the DOL’s Terminated Vested Participants Project audits involving terminated defined benefit plans. While it was part of the guidance the rest of this article will focus on the first two prongs which have more relevance for defined contribution plans.


DOL Best Practices for Locating and Tracking Missing Participants:


A well-run plan should have processes and procedures to make sure plan records are up-to-date and benefits are paid timely. Examples of DOL Best Practices are:


  • Maintain accurate census information
  • Contact participants on a periodic basis to confirm and update contact information (address, phone and cell numbers, email, next of kin/emergency contact information, etc.)
  • Using self-service platforms that allow participants to update contact information
  • In the case of a change in plan providers, a business transaction such as a merger, acquisition, or divestiture, pay special attention to the transfer of plan information and relevant employment records.
  • Implement effective communication strategies such as clearly stating up front what the communication is about, encourage contact through plan/plan sponsor websites and toll-free numbers, confirm contact information during the onboarding and exit processes. In the case of a business transaction clearly mark correspondence with the original plan sponsor name that would be more familiar to the participant.
  • Conduct Missing Participant Searches. Options might be to check related plan and employer records, contacting beneficiaries and emergency contacts, asking former colleagues if they know the whereabouts of the participant. Use of free online searches, public record databases, death notices and social media or commercial locator services may be appropriate.


Again, these are some examples and not the exclusive or exhaustive list. While there’s no one size fits all approach fiduciaries should have written procedures to document key decisions and processes that have been established or undertaken to locate missing participants. And based on experience, the sooner you act to locate a missing participant (e.g., as soon as mail was returned undeliverable), the higher the probability to locate them.


DOL Temporary Enforcement Policy on Fiduciaries of Abandoned Insolvent Plans:


DOL Field Assistance Bulletin (FAB) 2021-01 announced the DOL’s temporary enforcement policy applicable to fiduciaries of terminating defined contribution plans and qualified termination administrators of abandoned plans.


A plan is not treated as terminated until all assets have been distributed. Under the DOL’s fiduciary safe harbor guidance for locating participants for terminating plans, the fiduciary of a terminating defined contribution plan could make distributions to an IRA, certain bank accounts or to a state unclaimed property funds as provided under the DOL regulations for those still missing participants. The FAB announces the DOL’s temporary policy on terminating defined contribution plans use of the Pension Benefit Guaranty Corporation’s (PBGC) Missing Participants Program.


The Missing Participants Program is intended to connect participants with their benefits who were missing when a Plan terminates. Rather than distributing the balance to one of the options above, a fiduciary may instead of the option to use the PBGC program. With respect to missing participants, the fiduciary of a terminating plan may participate in this program by either transferring the balances to the PBGC or provide the PBGC with information about where the account balance was transferred. There are modest one-time fees to participate in the program but no annual or transaction-based fees or distribution charges. It is important to note the fiduciary still has the obligation to make diligent efforts to locate missing participants, but this may be a good option in those cases where despite the best efforts the participant is still missing.




While the new guidance is welcome it’s not without its downsides. Fiduciaries are not expected to take every step in the Best Practices but balance the cost and burden against the amount of money at issue and steps most effective considering the plan participants.   But will this give rise to questioning why a certain action was taken and/or why it wasn’t taken. Also, the guidance is in for form of guidance, Field Assistance Bulletins and Releases. They do not have the effect or laws or regulations. However, if there’s a key takeaway, keeping track of participants is a fiduciary obligation and the DOL takes it seriously. Plan fiduciaries need to also take it seriously.