New DOL Rule Eases Burden of Missing Retirement Plan Participants

By Kimbarley A. WIlliams, CPA

Businesses frequently ask: What should I do with the assets in my employee benefit plan if I can’t find their owner?

It’s a common occurrence. Former employees move on and drop out of sight. They have funds in their qualified retirement savings plan but haven’t updated their contact information and aren’t actively managing their accounts. When the employer needs to communicate plan changes or issue distributions, these participants are nowhere to be found, and checks go uncashed.

Putting the funds into an IRA is one option, but that’s not always the best course for the participant because IRAs can charge fees that deplete the retirement accounts.

Fortunately, a new rule from the DOL offers a bit of relief through a simple procedure to put small-dollar accounts in state hands and make it easier for the funds to find their way to the participant or beneficiary.

New DOL rule

On January 14, 2025, DOL issued Field Assistance Bulletin (FAB) 2025-01. Under this rule, sponsors and administrators of ongoing defined contribution (DC) plans can voluntarily transfer unclaimed small accounts, up to $1,000, including uncashed checks, into state unclaimed property funds.

The goal is to keep accounts whole by storing them safely in fee-free state systems designed to reunite individuals with their unclaimed property.

To qualify for relief, fiduciaries must:

• Determine that transferring to a state unclaimed property fund is a prudent destination for the retirement account.
• Have a prudent program to find missing participants, consistent with the DOL’s Missing Participants Best Practices for Pension Plans (www.dol.gov). This can be frustrating, as years may have passed, and participants may have moved or died in the interim. Still, an active practice demonstrates that the fiduciary has taken every possible step to find the account owner.
• Select the unclaimed property fund listed on the state of the participant’s or beneficiary’s last known address. For instance, if the last known address of a Maryland-based company's beneficiary is in Pennsylvania, the company would be required to turn over those funds to the Pennsylvania unclaimed property fund (www.patreasury.gov/unclaimed-property).
• Explain in the summary plan description that retirement benefit payments of missing participants or beneficiaries may be transferred to an eligible state fund. The summary must share a plan contact's name, address, and phone number who can provide further information on the eligible state funds holding the retirement benefit payments.
• Determine that the state unclaimed property fund qualifies as an eligible state fund (FAB 2025-01 includes further details).

When a company meets the conditions and location efforts have failed, employers can transfer amounts under $1,000 into the designated state unclaimed property fund.

One important note: This policy is temporary. However, the DOL will consider issuing more formal guidance on transfers from ongoing plans to state unclaimed property funds.

Tell employees about the Retirement Savings Lost and Found Database

A valuable new tool available that employers can use and share is the Retirement Savings Lost and Found Database, created under SECURE Act 2.0 in the ongoing effort to reunite lost participants with their retirement funds.

Database participation is voluntary, and DOL encourages plan administrators and recordkeepers to submit information to help former employees find the benefits owed to them.

Employers are also encouraged to tell employees about the searchable database. Users must create an account through Login.gov. Existing Login.gov accounts are acceptable, but the system might request additional verification information that includes:

• Driver’s license or state ID.
• Social Security Number.
• Phone number match through a verification code.
• Re-entry of the user’s login.gov password.

Once users are approved, they can search the database for any accounts attached to their names. It’s a useful service that employees will appreciate, and it can help minimize the problems employers encounter in the search for missing participants.

Learn more

Locating missing participants and reuniting them with their retirement funds is not one-size-fits-all. Each circumstance is different, and the DOL’s new bulletin covers only a limited number of situations.

For knowledgeable, customized guidance on managing the retirement accounts of missing participants, contact Kimbarley A. Williams, Chair of Boyer & Ritter’s Employee Benefit Plan Services Group.

About the Author

Kimbarley A. Williams, CPA, is a principal at Boyer & Ritter LLC and is chair of the firm’s Employee Benefit Plan Services Group. Kim has over 20 years of experience providing audit, accounting and tax services to employee benefit plans, business trade associations, charitable organizations, community foundations, and closely held businesses. Contact Kimbarley at 717-761-7210 or kwilliams@cpabr.com.