Plans have participants, participants are people and people sometimes disappear. It is unfortunately a fact of plan administration and it can be a problem. As I mentioned last week, health care reform has about 5 new notices that have to be sent to participants. There are annual notices and reporting that requirements that apply to retirement plans. Even non-qualified plans have notices that have to go out. But what happens when you can't find a participant?
The general rule under ERISA is that communications have to be made in a manner reasonably calculated to reach a substantial number of plan participants. Certain specific notices, like COBRA notices, have to be issued in a manner reasonably calculated to reach that participant. But missing from the regulatory scheme is any set action that a plan sponsor must take in locating participants. Fortunately, there is no requirement that a plan sponsor actually confirm receipt of notice (although best practices sometimes makes us want to confirm receipt). But what if we really need to locate them. For example, what if we are terminating a plan and they have to be told?
DOL Field Assistance Bulletin 2004-02 provides guidance on locating missing participants in defined contribution plans. It gives search methods and default treatment of account balances for participants you can't find. The PBGC has a Missing Participants Program, but its application is limited to locating missing participants when terminating a defined benefit pension plan. If you are dealing with these situations, follow the rules to the letter and you will be safe.
But for other plans, maybe all you can do is look. Some search methods recommended include
- Certified mail.
- Contact participant's designated beneficiary
- Consult related plan records from the employer
- Use of a service that forwards letters. The Internal Revenue Service and the Social Security Administration both offer this kind of service. The IRS also has a missing participant program.
- Internet search tools
- Commercial locator services
- Credit reporting agencies
It might be worthwhile for a plan to consider adopting certain administrative guidelines for dealing with participants that cannot be located. For example, if participant consent is required to change administrators (such as in a employee stock plan or some other retirement plan), consider inserting a provision in the plan that provides that if consent is not denied within 30 days from the notice date, it will be deemed accepted. Or perhaps inserting specific language that obligates the participant to provide the plan with current contact information with the under standing that the plan will rely on that information as current unless told otherwise.
I also think that providing a plan administrator with broad discretionary authority to administer the plan and to take whatever steps are necessary to accomplish the purposes of the plan helps. This type of "reservation of rights" gives plan administrators more leeway in dealing with issues that arise, like lost participants and how they will be treated. So think about how you will deal with lost people before you lose them. That may save time and effort in dealing with missing persons.