11/8/17

Labor and Employment Alert: Finding Lost Participants, Annual Limit Update and Tax Bill Implications

Related Practices

Related Insights

Attorneys & Professionals

We have become aware that the Department of Labor (DOL) has started to take issue with the standard processes used by retirement plans to identify and locate lost participants in ongoing plans.

There is currently no official guidance outlining the standard procedures that retirement plans should follow to maintain contact with or locate deferred vested participants (i.e. former employees who have a right to future benefits). The DOL has only published guidance outlining the procedures that a terminating retirement plan should follow to locate missing participants, and that ongoing plans should follow before making automatic rollover distributions to an IRA for participants who are owed small-sums (between $1,000 and $5,000). 

Despite this lack of guidance, the DOL has been asserting in recent audits that a retirement plan’s failure to identify and locate a missing participant is a breach of fiduciary duty. This is the case even when the retirement plan has followed its procedures and has relatively few missing participants.

Most retirement plans flag a participant as “lost” if any mailed plan communication has been returned by the United States Postal Service. Most retirement plans have contracted with a third party provider to run a search with a commercial locator service to attempt to find an updated address for the flagged lost participants (or to confirm that the participant has died).  Most retirement plans assume that the remaining addresses are correct. 

DOL agents have been challenging different parts of this standard process. First, DOL agents have been taking the position that a retirement plan cannot assume that a participant’s address is correct simply because the envelope is not returned by the United States Postal Service.  Second, DOL agents have challenged the reasonableness of the search process if the plan does not use multiple methods to attempt to find the participants. 

In light of the DOL’s recent position on identifying and locating lost participants, we recommend the following:

Cost of Living Adjustments

A chart with 2016, 2017 and 2018 retirement plan indexed amounts is available here.

Tax Cuts and Jobs Bill would affect employee benefits

As you have probably heard, the Tax Cuts and Jobs Act as introduced in the House on November 2, 2017, does not delve back into health care reform, but the bill as proposed would impact the following employee benefits:

Alternatives are already being discussed and it is uncertain whether any bill will ultimately be enacted, much less what provisions might be in the final version of the bill. We will monitor these items as the bill moves through Congress.