Over the past several years, both the IRS and DOL have increased enforcement efforts to ensure former employees who are vested in benefits under one or more employer defined benefit plans are receiving proper notification about benefit eligibility and commencement. A recent DOL Compliance Assistance Memo reiterates these efforts. We urge all plan sponsors to review their Plan’s demographic information and procedures to ensure that a compliance issue is not hiding in plain sight.
Warning signs of potential issues
- More than a small number of terminated vested participants at or above normal retirement age
- Insufficient procedures to alert participants prior to normal retirement about commencing benefits
- Terminated vested participants beyond their required minimum distribution (RMD) date
- Incomplete or inaccurate contact information
Where to start
- Review the plan’s demographic summary in the annual valuation report
- Review your internal administration policies and procedures
- Speak with your service provider to understand what is or is not being done
- Review the DOL’s suggested Best Practices
- Take action to implement corrective procedures beginning with those eligible for benefits
- Update records and verify contact information
- Determine the appropriate person or people to carryout your plan
- Document your efforts
Contact your BPAS representative to learn more about the DOL best practices and our administrative services that may be able to help in your efforts to track missing participants.
William Stuart, ASA, EA, MAAA is Vice President, Chief Pension Actuary with BPAS Actuarial & Pension Services.