Managing your organization’s retirement plan comes with many administrative and compliance tasks, including the management of missing participants. Many plan sponsors can relate to the trials and tribulations of having missing participants in their plans, and while it may seem like an endless game of hide and sneak, missing participants are not always intentionally hiding. As a result, plan sponsors are tasked with tracking down these missing participants so that they are no longer faced with administrative burdens, increased plan costs, and fiduciary risk.
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What are Missing Participants?
Missing participants are former employees of your organization who have left an account balance in their retirement plan but have failed to keep their contact information up to date and are no longer actively managing their accounts.
Some signs of missing participants include:
- Returned emails
- Returned mail
- No recent web account or phone activity
- Uncashed distribution checks
What Causes Missing Participants?
Missing participants are not always intentional. In most cases, missing participants realize that they have a retirement savings account, but many also do not even know one exists in their name. Missing participants can be caused by a variety of factors including:
Employment Changes
- Unlike the generations of our parents or grandparents, employees typically do not work for the same company for their entire careers. It is estimated that the average person will have 12 jobs in their lifetime.
Mobilization
- Over the course of the past couple of years, companies have become more remote, allowing employees to move and work from wherever they please. While some employees have stayed put, others have chosen to move from place to place. With employees always on the move, it can be difficult to keep current contact information up to date.
Portability
- Barriers to portability result in high volumes of cashouts as well as a large number of retirement accounts that are stranded due to a job change.
Death
- There is a chance that a missing participant may be deceased and may be unknown to the plan sponsors. Once the status is known, plan sponsors must locate the individual’s beneficiaries so that the plan benefits can transfer.
What Plan Sponsors Should Do
Between job changes and relocation alone, it can be challenging to keep track of plan participants once they leave your organization. However, to prevent missing participants, it is critical to develop procedures to ensure contact information is up to date as well as illustrate proactive measures employed in this effort.
Plan sponsors should communicate with employees about the importance of keeping their contact information up to date so that they can continue to receive their benefits. In addition to communication, plan sponsors can also implement some of the best practices recommended by the Department of Labor:
Annual Account Review
- Schedule time to meet with your employees to update contact information and review beneficiaries. This also applies to employees who have retired or been terminated from your organization. One tip to navigate this issue is by reviewing the information on file during the exit interview.
Mailings
- When completing a mailing, include a form where individuals can update their contact information.
Returned Mail
- If you receive mail that has been returned due to “wrong address”, “addressee unknown” or otherwise, initiate a search for the participant as soon as possible to prevent further issues.
System Log In
- For participants that regularly log into their employee system, set a reminder that directs users to update their contact information.
Still have Missing Participants? California Pensions Can Help
Even with best practices and protocols in place, plan sponsors can still have missing participants within their retirement plan. Plan sponsors have a fiduciary responsibility to follow the terms of the plan document and ensure that participants are receiving their promised benefits. By implementing a well-documented and organized process, plan sponsors are mitigating the risk of increased missing participants. If you would like to learn more about missing participants or setting up a structured plan for your organization, the team at California Pensions can help.
