DOL FAB 2021-01 Provides Temporary Enforcement Policy for Terminating Defined Contribution Plans' Use of the PBGC's Missing Participants Program | Practical Law

DOL FAB 2021-01 Provides Temporary Enforcement Policy for Terminating Defined Contribution Plans' Use of the PBGC's Missing Participants Program | Practical Law

The Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2021-01, which announces the DOL's temporary enforcement policy on terminating defined contribution plans' use of the Pension Benefit Guaranty Corporation's (PBGC's) expanded Missing Participants Program. The DOL also issued Compliance Assistance Release No. 2021-01, which provides DOL Regional Offices with consistent investigative processes regarding missing participants. Additionally, the DOL issued a list of best practices to help plan fiduciaries deal with the problem of missing or nonresponsive participants.

DOL FAB 2021-01 Provides Temporary Enforcement Policy for Terminating Defined Contribution Plans' Use of the PBGC's Missing Participants Program

by Practical Law Employee Benefits & Executive Compensation
Published on 15 Jan 2021USA (National/Federal)
The Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2021-01, which announces the DOL's temporary enforcement policy on terminating defined contribution plans' use of the Pension Benefit Guaranty Corporation's (PBGC's) expanded Missing Participants Program. The DOL also issued Compliance Assistance Release No. 2021-01, which provides DOL Regional Offices with consistent investigative processes regarding missing participants. Additionally, the DOL issued a list of best practices to help plan fiduciaries deal with the problem of missing or nonresponsive participants.
On January 12, 2021, the DOL issued Field Assistance Bulletin 2021-01, which announces the DOL's temporary enforcement policy on terminating defined contribution plans' use of the Pension Benefit Guaranty Corporation's (PBGC's) expanded Missing Participants Program. The nonenforcement policy applies to fiduciaries of terminating defined contribution plans and qualified termination administrators (QTAs) of abandoned individual account plans.
The DOL also issued Compliance Assistance Release No. 2021-01, which provides DOL Regional Offices with consistent investigative processes regarding missing participants. Additionally, the DOL issued a list of best practices to help plan fiduciaries deal with the problem of missing or nonresponsive participants.

Missing Participants

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).
For more information, see:

PBGC Missing Participants Program

In 2017, the PBGC issued final regulations that expand, revise, and simplify the PBGC's missing participants program to include, on a voluntary basis, terminated defined contribution plans, as well as other changes (82 Fed. Reg. 60800 (Dec. 22, 2017); see Legal Update, PBGC Final Regulations Expand Coverage of the Missing Participants Program). Until the release of the final regulations, the missing participants program had covered only terminated, single-employer, defined benefit pension plans.
The PBGC's Defined Contribution Missing Participants Program holds retirement benefits for missing participants and beneficiaries in most terminated defined contribution plans and helps those participants and beneficiaries find and receive those benefits.

Temporary Enforcement Policy Under FAB 2021-01

According to the DOL, the COVID-19 pandemic may disrupt the recordkeeping and search activities of plan sponsors and service providers, and it also may cause many employees to lose contact with their employers and plans, which makes the PBGC's missing participants program even more important than before.
Therefore, pending further guidance, the DOL will not pursue violations under ERISA Section 404(a) (29 U.S.C. § 1104(a)) against responsible plan fiduciaries of terminating defined contribution plans or QTAs of abandoned plans in connection with the transfer of a missing or non-responsive participant's or beneficiary's account balance to the PBGC (rather than to an IRA, certain bank accounts, or to a state unclaimed property fund), if the plan fiduciary or QTA:
  • Complies with the guidance in FAB 2021-01.
  • Has acted in accordance with a good faith, reasonable interpretation of ERISA Section 404 with respect to matters not specifically addressed in FAB 2021-01.
However, the DOL may still pursue violations under:
  • ERISA Sections 404 or 406 (29 U.S.C. §§ 1104 or 1106) for a failure to diligently search for participants and beneficiaries before the transfer of their account balances to the PBGC.
  • ERISA Sections 107, 209, or 404 (29 U.S.C. §§ 1027, 1059, or 1104) for a failure to maintain plan and employer records.
FAB 2021-01 supersedes FAB 2014-01, to the extent they conflict.
FAB 2021-01 provides:
  • Additional information on transferring account balances, or lump sum distributions of account balances, to the PBGC.
  • That a plan fiduciary may pay the flat fee for certain accounts transferred to the PBGC's Defined Contribution Missing Participants Program unless the plan terms prohibit such payment, and in the case of an abandoned plan, the DOL will not treat a QTA as violating ERISA Section 404(a)(1)(D) for a failure to comply with plan terms merely because the QTA disregards plan terms that require expenses such as this fee to be paid by an employer that is no longer available.
  • That plan fiduciaries and QTAs who do not elect to transfer account balances to the PBGC to participate in the Defined Contribution Missing Participants Program are encouraged to notify the PBGC about the disposition of the account balances of all or some missing participants (these plans are known as notifying plans).
In addition to the FAB, the DOL issued:
  • Compliance Assistance Release No. 2021-01, which provides investigative protocols to ensure consistent investigative processes and case-closing practices among the different regional offices within the DOL's Employee Benefits Security Administration (EBSA) that are conducting Terminated Vested Participants Project (TVPP) audits. This memorandum also aims to facilitate voluntary compliance efforts by plan fiduciaries.
  • A list of best practices for retirement plans to take regarding missing or nonresponsive participants.

Practical Implications

Defined contribution plan fiduciaries should be aware of the DOL's latest guidance regarding missing participants, especially during the difficulties and dislocations caused by the COVID-19 public health crisis. The temporary enforcement policy announced in FAB 2021-01 provides plan fiduciaries with a safe harbor when they transfer a missing or non-responsive participant's or beneficiary's account balance to the PBGC under the PBGC's Defined Contribution Missing Participants Program. Plan fiduciaries should consult Compliance Assistance Release No. 2021-01 and the accompanying list of best practices to further enhance their compliance efforts.