401(k) plan administrators, DOL needs your help finding ‘missing’ participants

The Labor Department this week proposed seeking the voluntary assistance of plan administrators in developing an online search tool to help workers gain access to lost retirement savings they had earned.

“Retirement plans, including pension and 401(k) plans, sometimes lose track of people owed benefits due to incomplete recordkeeping, people changing employers and other reasons,” the department said, in announcing the proposal. “In other cases, workers may lose track of their retirement plans after their former employer goes out of business or when companies merge. People in these situations are considered ‘missing participants.’”

The data that the Labor Department hopes to collect consists mainly of mailing addresses, email addresses, and telephone numbers of separated vested participants and beneficiaries, according to department officials.

Comments in the Federal Register on the proposal are due June 17. In addition to general comments on the so-called Lost and Found, department officials said they are seeking suggestions on ways to improve the program.

They said that establishment of the Lost and Found is required by federal law. The SECURE 2.0 Act requires the Employee Benefits Security Administration to establish the tool by Dec. 29, 2024.

“The fundamental purpose of any retirement plan under the Employee Retirement Income Security Act is to pay promised benefits, and the Retirement Savings Lost and Found database will be another tool to help plans do so,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “Our goal, which we believe plan sponsors and administrators share, is making sure that workers and their beneficiaries receive the retirement benefits they earned and were promised. We need to work together to achieve that goal.”

The department had planned to use data that plan administrators submitted to the Internal Revenue on their Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, better known as Form 8955-SSA. However, the Labor Department said that the IRS said it will not release that data to the Labor Department officials, citing a section of the IRS code that prohibits the agency from releasing taxpayer information.

And so, the DoL is asking plan administrators for their help.

Department officials said they already administer the Terminated Vested Participants Project, which attempts to ensure that plans have adequate census and other records to determine the identity and address of participants and beneficiaries, the amounts of benefits due and when participants can expect to receive their benefits. That project also is designed to ensure that plans have appropriate ways to search for separated participants and to notify them about their benefits. Labor Department officials said that since 2017, they have recovered more than $6.7 billion for missing participants and beneficiaries.

Related: The true cost of ‘forgotten’ 401(k) accounts: $1.65 trillion

Following the DoL announcements, attorneys from the Groom Law Group said that the department has not yet provided incentives for plans to participate. Such incentives could include a fiduciary safe harbor or clarifying whether costs for providing the data can be paid out of plan assets.

Administrators will have to weigh those costs and risks associated with their voluntary participation, they said. For instance, they may need to consider whether the department can demonstrate that Lost and Found has implemented cybersecurity practices consistent with the department’s cybersecurity guidance, they added.