Managing Participant Data: Tips and Best Practices

Managing participant data effectively is efficient, but it’s also more than that. Recent blog entries argue that it also provides a way to meet fiduciary responsibilities and address the problem of missing participants — if not obviate it in the first place.

It’s not hard to get into that position, argues Sheila Freund in “Finding Missing Participants in your Defined Contribution Plan,” an entry in Watkins Ross’ blog. “When participants terminate employment many often leave their defined contribution accounts with their former employers. Over time, many simply forget they even had an account,” writes Freund.

In “Best Practices for Managing Participant Data,” a recent entry in its blog, PlanPILOT reminds that performing that function is a fiduciary responsibility under ERISA. Freund concurs, admitting that finding missing participants can be “frustrating and time-consuming,” but that nonetheless there is a fiduciary responsibility to provide disclosures to them. And, PlanPILOT adds, with heightened federal emphasis on locating missing participants, keeping data about participants up to date is more important than ever.

“When you have outdated or lost data, it is necessary to take the appropriate measures to find and identify missing participants and beneficiaries in order to notify them of plan changes or distributions,” says PlanPILOT. “Be sure to document each of your actions and the results,” it adds.

Not only are the Department of Labor and IRS focusing more on missing participants, warns PlanPILOT, the IRS is offering less help in finding them. But the DOL and IRS have offered some tips for doing so:

• send a notice by certified mail to the last known mailing address;
• send an inquiry to the designated plan beneficiary;
• send a notice to personal email address(es), phone numbers and emergency contact phone numbers on file;
• use internet search tools and public record search engines;
• do research through credit reporting agencies; and
• use commercial locator services.

PlanPILOT builds on that and suggests that best practices for managing participant data also include the following:

• Regularly update participant and beneficiary contact information. Include reminders in participant communications to encourage participants to advise plan sponsors and recordkeepers of any changes.
• Identify multiple points of contact for each record. Include: Mailing addresses, phone numbers and email addresses, as well as next of kin/emergency contact information.
• Establish a system for searches. Document steps taken for locating missing/unresponsive participants.
• Put procedures in place for managing missing participants’ accounts.

Freund adds that one can review company and records related to the plan for updated information; for instance, the company’s health insurance or payroll provider, as well as current employees, may have such information.

And, Freund says, an employer and plan can protect themselves through efforts to find missing participants. She adds that efforts in that vein should be well-documented. “Records of steps taken to actively search for missing participants can be used to defend against possible DOL claims,” she writes.