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PBGC Final Regulations Expand Coverage of the Missing Participants Program
Practical Law Legal Update w-012-3985 (Approx. 6 pages)
PBGC Final Regulations Expand Coverage of the Missing Participants Program
by Practical Law Employee Benefits & Executive Compensation
| Published on 04 Jan 2018 • USA (National/Federal) |
The Pension Benefit Guaranty Corporation (PBGC) issued final regulations that change the current missing participants program and expand its coverage to include multiemployer plans covered by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), terminated defined contribution plans (including 401(k) plans and profit sharing plans), and small professional services defined benefit plans not covered by Title IV. The final regulations also revise, simplify, and update the missing participants program.
On December 21, 2017, the Pension Benefit Guaranty Corporation (PBGC) issued final regulations that expand, revise, and simplify the PBGC's missing participants program (82 Fed. Reg. 60800 (Dec. 22, 2017)).
The final regulations expand the coverage of the missing participants program to include terminated multiemployer plans covered by Title IV of the Employee Retirement Income Security Act of 1974 (ERISA) (see Practice Note, Multiemployer Pension Plans), and, on a voluntary basis, terminated:
- Defined contribution plans (including 401(k) plans and profit sharing plans).
- Small professional service defined benefit plans with 25 or fewer participants that are not covered by Title IV.
The final regulations are substantially similar to the proposed regulations changing the missing participants program (see Legal Update, PBGC Issues Proposed Regulations Expanding Missing Participants Program).
The PBGC issued a press release and also established a website for the expanded missing participants program that provides draft forms and instructions.
The expanded program will be available for plans that terminate on or after January 1, 2018.
Background
Plan administrators of retirement plans governed by ERISA must make distributions of a participant's benefit by particular dates. When attempting to make the required distributions, a plan administrator may be unable to locate certain participants or beneficiaries entitled to the required distribution. In these situations, ERISA's fiduciary responsibility provisions require plan administrators to make reasonable efforts to locate the missing participants.
The issue of missing participants commonly arises in plan terminations, which require distribution of all participant benefits under the plan before a plan termination. To address this, the PBGC created a missing participants program, which outlines the steps that a plan administrator must take to attempt to locate missing participants in single-employer defined benefit plan terminations (29 C.F.R. §§ 4050.1 - 4050.12). The Department of Labor (DOL) also issued Field Assistance Bulletin 2014-01 (FAB 2014-01) on August 14, 2014, which provides guidance on the steps fiduciaries of terminating defined contribution plans must take to locate missing participants.
Until the release of the final regulations, the missing participants program had covered only terminated, single-employer, defined benefit pension plans. As authorized by the Pension Protection Act of 2006 (PPA), the final regulations expand the coverage of the PBGC's missing participants program to other terminated retirement plans.
In JCEB Q&As, the PBGC indicated that it:
- Was planning for the final missing participant regulations to be published, effective, and available to plans terminating as of and after January 1, 2018.
- Viewed the final regulations as a deregulatory action under Executive Orders 13771 and 13777.
For more information on the missing participants program before the issuance of the final regulations, see:
Changes to the Proposed Regulations
On September 20, 2016, the PBGC published proposed regulations that:
- Expand the missing participants program to terminated multiemployer plans covered by Title IV of ERISA similar to the program for covered single-employer plans.
- Provide a voluntary program for terminated defined contribution plans and small professional service defined benefit plans with 25 or fewer participants not covered by Title IV.
The final regulations are substantially similar to the proposed regulations, but the PBGC adopted several of the written comments it received on the proposed regulations.
Overview of the Final Regulations
As revised, the missing participants program's major features include:
- For defined contribution plans, a new option to deal with missing participants and beneficiaries when the plans terminate.
- A database of unified and unclaimed pension information about missing participants and their benefits from terminated defined benefit and defined contribution plans.
- A defined benefit and defined contribution plan directory for persons who want to learn whether retirement benefits are being held for them.
- Privacy features about missing persons to prevent inadvertent information disclosure.
- Periodic active PBGC searches for missing participants.
- For plans that transfer missing participants' benefits into the program, there is a one-time administrative fee for benefits over $250. There are no ongoing maintenance fees or distribution charges.
- If participants or beneficiaries fail to make necessary benefit elections upon plan termination, or fail to accept lump sum benefits such as uncashed checks, they are treated as missing persons.
- Fewer benefit categories and fewer sets of actuarial assumptions for defined benefit plans when determining the amount to transfer to the PBGC, and a free online actuarial calculator.
Applicability Date
The expanded missing participants program created by the final regulations applies to:
- The termination of plans other than a multiemployer plan covered by Title IV of ERISA that terminate on or after January 1, 2018.
- The close-out of a multiemployer plan covered by Title IV of ERISA where the close-out is completed after calendar year 2017.
Practical Implications
Retirement plan sponsors should familiarize themselves with the PBGC's final regulations governing the missing participants program. The final regulations:
- Expand the program to cover terminated defined contribution plans, small professional service defined benefit plans with 25 or fewer participants, and multiemployer plans covered by Title IV. The expanded program is voluntary for defined contribution and small professional service plans.
- Streamline and reduce the burdens of the program for terminated single-employer defined benefit plans, which were already covered under the program. The final regulations change how plans determine the amount of money to transfer to the PBGC, provide better protection of key features of participants' benefits, and ease the transfer of benefits to the PBGC.
The new program will make it easier for participants to locate their retirement benefits after their plan terminates. The PBGC expects that new missing participant names will be added to the existing online directory within several months because the expanded program is only open to plans that terminate on or after January 1, 2018.