It might seem counterintuitive, but plan sponsors are responsible for keeping track of participants, even after they leave the company. Sometimes these former employees become “missing participants,” meaning they’ve left an account balance in the plan but haven’t provided their updated contact information. In other cases, these former employees may simply stop responding to communications from the plan sponsor.
Missing participants can create real headaches for plan administration, especially when you’re trying to terminate a plan or reduce small account balances to lower recordkeeping costs. Still, the law requires plan sponsors to provide plan notifications to all participants, and failure to meet these disclosure obligations can result in penalties.
Steps for Locating Missing Participants
The Department of Labor (DOL) requires plan sponsors to follow a prudent and consistent process to locate missing participants. Here’s a recommended framework:
1. Develop a Consistent Process
Create a documented procedure for locating missing participants that can be applied consistently over time.
2. Audit Plan Data Regularly
Review your census file, which includes participant contact information, to identify any gaps or outdated data. Make auditing a routine part of your administrative process
3. Determine Next Steps
After reviewing your data, assess whether additional measures are needed to locate participants. Remember, it’s the sponsor’s duty—not the participant’s—to maintain contact.
Consider the following tools:
- Free online search engines and public databases (such as those for licenses, mortgages, and real estate taxes)
- Obituaries
- Social media
- Commercial locator services or credit-reporting agencies
- Other reasonable methods, provided privacy rights are respected
4. Document everything
Keep clear records of the process, steps taken, and results for audit and compliance purposes.
5. Revisit the Process Regularly
This isn’t a one-time task. Add this to your fiduciary calendar and reassess periodically, based on your plan’s size and complexity.
Following these steps not only helps you stay compliant but also ensures participants maintain access to their hard-earned retirement savings. Let us know if you need help evaluating your current process or implementing a new one.