Most pension plans offer defined benefits for participants at the time they retire. However, over time, many plan participants move multiple times for a new job or to downsize in retirement. This can leave the pension plan without the current contact information for plan participants and leave individuals without their expected retirement income. Pension plans may have a fiduciary duty to locate missing participants and beneficiaries.
The Pension Benefit Guaranty Corporation (PBGC) is a government agency that protects the retirement incomes of millions of American workers. The purpose of the PBGC Missing Participants Program is to “connect missing participants with their benefits from terminated plans that are closing out.” Pension plans can use the optional Missing Participants Program to locate participants and beneficiaries and make sure they get their benefits.
Anyone who has tried to locate a long lost friend understands how difficult it can be to track someone down once they have lost touch. For pension plans, keeping track of thousands of plan participants can be administratively complicated, to say the least. This means keeping current contact information for participants who may have moved multiple times, changed names, or become incapacitated due to an illness.
A participant or beneficiary is considered missing when the plan does not know the individual's location. This includes where a notice from the plan is returned as undeliverable. Missing may also include “unresponsive” individuals, where the individual does not return necessary paperwork for how payments should be made, or if the individual does not accept a lump sum payment.
Plans must conduct a “diligent search” to locate beneficiaries before they can be reported as missing. If the plan cannot locate the beneficiary or participant after a diligent search, the distributee may be reported as “missing.” However, there may be no need to conduct a diligent search for solely unresponsive beneficiaries.
By participating in the PBGC's Missing Participants Program, pension plans (and now, under the expanded Program, defined contribution plans) can increase the chances for locating missing participants and connecting beneficiaries to lost benefits. The Missing Participants Program has a searchable directory of missing plan participants, which allows participants and beneficiaries to do an online search to locate benefits.
The PBGC allows pension plans to transfer account balances of any size directly to the PBGC or provide PBGC with information about where the account is held. If a plan does decide to transfer beneficiaries' account balances to the PBGC, the plan must transfer account balances for all missing distributees, under the “all or nothing” rule.
Benefits held with the PBGC even gain interest at the federal mid-term rate, with the availability of lifetime income options for balance transfers in excess of $5,000. Accounts held with the PBGC are not subject to distribution charges or ongoing maintenance fees. However, the PBGC does charge a one-time administrative fee for each missing distributee with a plan payment of more than $250.
Butterfield Schechter LLP is San Diego County's largest firm focusing its law practice on employee benefits. Our firm can help you locate missing participants and stay in compliance with ERISA fiduciary duties. Contact our office today with any questions on how we can help you and your business succeed.