Tracking Plan Participants

Plan Participants

Written by Charlie Wendlandt

May 20, 2021

As a plan sponsor or plan administrator, you have a fiduciary obligation to ensure plan participants are receiving the benefits they had earned during their tenure. Participants often move, change contact information, or simply cut ties with their colleagues after retirement or terminating their employment status. This tends to exacerbate the difficult task of maintaining accurate contact and beneficiary information for the plan sponsor. The Employee Benefits Security Administration (EBSA) has taken serious action to ensure retirement plans remain in compliance with their fiduciary obligations in regards to dislocated participants. In 2020 alone, EBSA investigators aided in locating missing and non-responsive participants totaling $1.4 billion dollars in retirement benefits.

The plan sponsor is ultimately responsible for everything related to the Plan; taking additional steps to locate a participant may be necessary. However, it is important to make note of the participants’ account balance to determine the cost vs. benefit of locating the missing participant(s).

Plan sponsors should first identify the problem. If the Plan notices mail/emails coming back as undeliverable or outstanding benefit checks for an extended period of time, it is best practice to develop procedures necessary to correct the issue. To be proactive, plan fiduciaries can start by reviewing census information periodically to determine if any information appears to be incorrect. The Plan can also begin following up with participants, retired or still employed, to ensure that they are reviewing contact and beneficiary information periodically and updating their personnel files with any applicable changes. EBSA has recommended an easy way to remind participants to review their personal information by simply including a contact and/or beneficiary change form in with the next Plan change notification or update. Use simple, plain English to make the objective of any notices clear and concise. Including the original plan sponsors (employer’s) name and listing out the subject in the first couple of sentences may also prevent recipients from prematurely throwing the notice away due to the impression that it is junk mail. It can also be helpful to provide sources that the participant can make use of to update their information, such as toll-free numbers, a participant accessible website or login, and return envelopes for any hard copy documentation.

If plan administration has identified a participant is no longer reachable with the information on hand, there are a number of solutions EBSA has provided. The first place to check is on other internal documents (with Human Resource or Payroll) to see if they had any more recent changes with those departments. Of course, checking with a close colleague of the missing participant to see if they had remained in touch over the years is always a good option too. Other sources of information could be beneficiaries, emergency contacts, social media, web browser search engines, or even local credit reporting agencies. Remember to document all the steps taken to locate the participant(s), along with any company policies or procedures created to help locate missing participants.

If the Plan has come to a point where it has exhausted all viable options to locate a participant, be sure that documentation of the attempts to contact the participant(s) is kept on file. It is an unfortunate conclusion to all the hard work performed, but it could save the Plan the time and scrutiny of a Department of Labor audit. As always, feel free to contact your Hawkins Ash representative for more information or any assistance you may need with regards to these issues.

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Charlie Wendlandt
I joined Hawkins Ash CPAs in 2011. As a manager, my main responsibilities include planning, test of transactions and preparation of financial statements for ERISA audits during outside of tax season. During tax season, I work with compilation and reviews and the preparation of corporate tax returns.

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