Published by Fiduciary Audit

Last year the Department of Labor (DOL) issued long-awaited guidance for retirement plans in the form of best practices that plan fiduciaries can follow to ensure that terminated vested participants, including “missing participants,” receive promised benefits when they are due. That guidance outlined what the DOL considers “Examples of Best Practices”: 

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• Maintaining accurate census information for the plan’s participant population. 
• Implementing effective communication strategies 
• Conducting missing participant searches 
• Documenting procedures and actions. 

Now that plan fiduciaries have some essential guidance for keeping track of and searching for terminated vested participants, what evidence do you need to demonstrate that the plan is meeting the DOL’s best practices guidance? One way of answering this question is to look at the DOL’s Terminated Vested Participants Program (TVPP), in which the DOL investigates retirement plans with issues related to keeping track of terminated vested participants and the timely distribution of their benefits. TVPP allows plan fiduciaries to avoid being cited by DOL for ERISA violations, such as breach of fiduciary duty arising from the failure to locate and pay participants when due, if fiduciaries timely and adequately correct recordkeeping, communication and other procedural flaws that are identified by the audit. 

When a plan is audited under TVPP, the DOL will ask for plan records, such as, census records, participant communication materials and documentation of plan procedures for locating and paying missing participants. The DOL investigation looks for systemic errors in recordkeeping and administration that may lead to loss of benefits for terminated vested participants, incomplete and missing participant data, and inadequate procedures for (1) identifying and locating missing participants, (2) communicating with participants to inform them of their right to commence benefits and (3) processing uncashed distribution checks. 

To demonstrate compliance with DOL best practice guidelines, you should consider taking the following steps to verify your actions: 

• Document each step of your missing participant procedures in writing 
• Document each step you took to update missing, outdated or incorrect data for each participant 
• Document each step you took to process returned mail or uncashed checks for each participant 
• Keep a copy of all participant communication 
• Always ask participants to confirm receipt (electronically or in writing) of each communication and retain receipt 
• Document payment of benefits for participants who are located 
• Periodically repeat the actions above.