It’s Like Déjà vu All Over Again

Paul MacCready, Vice President Relationship Management

August 28, 2019

Fiduciaries of retirement plans are hoping this infamous Yogi Berra line does not ring true but it’s looking a lot like 2014 again when inexact guidance opened the door to strict, arbitrary and inconsistent enforcement of the Employee Retirement Income Security Act (ERISA).


As a quick refresher, on August 14, 2014 the Department of Labor (DOL) attempted to clarify the following question: “How can the fiduciaries of terminated defined contribution plans fulfill their obligations under ERISA to locate missing participants and properly distribute the participants’ account balances?”[1] The bulletin issued at that time cited the elimination of letter-forwarding services by both the Internal Revenue Service (IRS) and Social Security Administration (SSA) and recommendations by the 2013 ERISA Advisory Council as reasons for replacing prior guidance issued in FAB 2004-02.

Hence, the new guidance, FAB 2014-01, stated that when there is no response to a termination notice, “the fiduciary needs to take steps to locate the participant or a beneficiary”[1] and it gave the following as minimal steps:

  • Use Certified Mail
  • Check Related Plan and Employer Records
  • Check With Designated Plan Beneficiary
  • Use Free Electronic Search Tools

The document goes on to discuss “Additional Search Steps” with this brief but troublesome comment:
If a plan administrator follows the required search steps, but does not find the missing participant or beneficiary, the duties of prudence and loyalty require the fiduciary to consider if additional search steps are appropriate.[2]

In unclaimed property compliance, we are accustomed to statutory guidance and we appreciate clarity. In stark contrast, the above statement caused fiduciaries to question what standards and circumstances the DOL had in mind that would require additional search steps beyond the minimum listed. This concern was heightened when the DOL explicitly listed “commercial locator services…and analogous services that may involve charges” as an option for holders to consider.


Why the trip down memory lane? Recent actions are causing fiduciaries to again ask for clarification from the DOL.

On October 2, 2017, the American Benefits Council (the “Council”) released a letter it sent to the DOL (directed to Timothy Hauser, Deputy Assistant Secretary for Program Operations). The letter explicitly requested that “the Department engage in a rule making process to issue comprehensive guidance on plan fiduciary responsibilities with respect to unresponsive and missing participants and cease taking ad hoc enforcement positions until the Department provides actual guidance.”[3]
The Council listed the below examples of DOL auditors varied actions in response to participant search efforts undertaken by active plans (not terminated plans):

  • Asserted that a plan administrator’s failure to locate a missing person was a breach of fiduciary duty, even when the plans procedures were followed
  • Threatened to refer plan sponsors to DOL’s Office of the Solicitor if plan failed to take action even where, in some instances, the actions suggested were impermissible under other regulatory regimes
  • Suggested that plan sponsors must “do whatever it takes” to locate missing participants
  • Asserted that a plan should search without limit for missing participants, rather than annually, thus not considering their fiduciary obligation to spend plan
    resources efficiently

The Council specifically requested the DOL consider these three questions:

  1. What search steps does DOL consider reasonable when ongoing plan fiduciaries are searching for missing participants after a participant has experienced a distribution event?
  2. What actions can an ongoing plan fiduciary take consistent with its fiduciary obligations under ERISA when amounts must be distributed from the participant’s
    account and the participant or beneficiary cannot be located, refuses to respond, or does not negotiate a check distributed to the participant or beneficiary?
  3. What search steps does DOL consider reasonable when ongoing plan fiduciaries are searching for unresponsive or missing participants before a participant experiences a distribution event?

The Council specifically cited FAB 2014-01 as lacking because it “is only directly applicable to terminated defined contribution plans.”[4] Suggestions were made but the main request was that the DOL reign in arbitrary interpretations and conclusions in favor of a process to produce well-reasoned and comprehensive guidance.

Is the DOL concerned about missing participants? In addition to the recent hearings on the subject, Keane can attest to the DOL’s interest as we received a December 15, 2017 letter from the DOL requesting information about the nature of our agreements with “ERISA covered health and retirement plan sponsors.” Individual states have also shown interest as evidenced by MetLife’s settlement with Massachusetts last year over pension claims.


Jumping forward to 2019, the DOL’s Advisory Council on Employee Welfare and Pension Benefit Plans met on June 26, 2019. The subject was Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds. Representatives from various states, associations, and commercial vendors provided testimony. The next meeting is planned for August 27-29.


Amongst those heard in June were Kevin Walsh and George Sepsakos, Principals at Groom Law Group (Groom). They contended that, “existing U.S. Department of Labor (the ‘Department’) guidance has not provided clear solutions.”[5] The renewed focus by the Department, Government Accountability Office and states on uncashed checks in the retirement space is concerning. “Plan fiduciaries and service providers want clear guidance that directs them to take specific action with respect to uncashed checks; there cannot be a replay of 2013 where an Advisory Council report led to enforcement action rather than guidance.”[6]

Causes that result in benefit distribution going uncashed, such as a lag in the participant updating their address, were raised. However, Groom contended that “shocking as it may seem, participants simply do not want access to their retirement funds”[7] for good reasons like losing access to Medicaid or a government issued stipend. The accumulation of microbalances was also raised where the amounts of uncashed benefits at issue are such that it is “imprudent” to undertake the expense of chasing down the participant(s).

Keane agrees with Groom that “plan fiduciaries want clear guidance that provides a safe harbor and that discusses things like whether plan fiduciaries should aggregate multiple outstanding checks for determining what processes should be applied, and whether different steps are required for checks that are less than $10, less than $100, less than $5,000 or over $100,000.”[8] Groom also called for guidance to be created with a nod toward fiscal prudence on behalf of the fiduciary.


The Government Accountability Office (GAO) has estimated the cumulative unclaimed retirement savings in the U.S. at 100 billion dollars.[9] The same survey estimated that $35 million in unclaimed retirement savings was reported to 17 states in 2016. Keane can attest that some fiduciaries do choose to escheat.

Escheat as an option is not without risk. One such concern was raised by Aliya Robinson, Senior Vice President for Retirement and Compensation Policy at The ERISA Industry Committee (ERIC), “There is a question about a beneficiary’s rights against the plan if the benefits are escheated to the state. Specifically, it seems that a beneficiary could assert a claim under ERISA section 502…the plan might find itself paying out the benefit twice.”[10]

The American Benefit Council commented on the current use of escheatment. Out of 55 plan sponsors responding to a survey, “only four had ever used the escheatment process for any retirement benefits.”[11] Challenges to escheatment expressed in the survey included lack of consistent treatment between state in rules and reporting requirements, concern about potential earnings liabilities, and uncertainty about the actions needed to locate missing participants.

Keane agrees that “Given the lack of clear guidance, plan fiduciaries are in a terrible position.”[12]


The fact that testimony is being taken is a good sign but history shows us that well-intentioned guidance can have an adverse impact in the form of aggressive and arbitrary enforcement. Concerns for the future include:

  • Expansion of the requirements around missing and unresponsive plan participants,
  • Potential broadening of search requirements to additional property types,
  • Inclusion across the board of nonexempt accounts like 403(b)s and 457s,
  • Stringent requirements for documentation of search attempts,
  • New interpretations of what defines an “unresponsive” participant, and/or
  • A host of issues if federal and state governments clash over the proper treatment of this property.

We come to the not obscure conclusion that future changes will include the following:

  • Intense search for missing participants relative to a distribution event, plus
  • Some level of ongoing testing to identify missing participants and some level of search for same prior to a distribution event.

Unfortunately, when guidance will be issued and whether it will be CLEAR is unknown. Until that time, plan fiduciaries continue to be left with the responsibility to decide the best course of action for their participants and their plans as a whole.

[1] FAB 2014-01
[2]  Id.
[3]  Hauser, T. (2017, October 2). Unresponsive and Missing Participant Guidance for Ongoing Retirement Plans.
[4]  Id.
[5]  Sepsakos, G. and Walsh, K (2019). Progressive Transfers of Uncashed checks from ERISA Plans to State Unclaimed Property Funds Testimony.
[6]  Id.
[7]  Id.
[8]  Id.
[9]  GAO-19-88
[10]  Sepsakos, G. and Walsh, K (2019). Progressive Transfers of Uncashed checks from ERISA Plans to State Unclaimed Property Funds Testimony.
[11]  Benefits Byte (2019, June 28). Council Testifies Before ERISA Advisory Council on Voluntary Escheatment from ERISA Plans to States.
[12]  Sepsakos, G. and Walsh, K (2019). Progressive Transfers of Uncashed checks from ERISA Plans to State Unclaimed Property Funds Testimony.

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