401(k) Specialist Issue 2 - 2024 - 40

401(k) PROVIDER PERSPECTIVE
6 Steps to a Strong Missing Participant Policy
By Tom Hawkins
MISSING PARTICIPANTS, defined as
individuals who have become disconnected
from their retirement savings-often
through their own inaction-are a significant
challenge that has long plagued
defined contribution plans. Unfortunately,
the responsibility for locating these persons
falls squarely on the shoulders of plan
sponsors.
Why Have a Missing Participants
Policy?
Policies, along with their related procedures,
provide a roadmap for day-to-day
operations. Having a documented missing
participant policy is about fulfilling a plan
sponsor's fiduciary duty to act in the best
interests of plan participants, and to ensure
that they receive benefits they are owed. It
not only guides a plan sponsor's actions,
but it can also signal to regulatory agencies
that a sponsor is serious about undertaking
reasonable efforts to identify and locate
missing participants.
Conversely, a weak or nonexistent
missing participant policy could expose
sponsors to unwanted scrutiny from a regulator,
or even lawsuits and penalties-while
a strong policy that doesn't line up with
day-to-day operations can be worse than
having no policy at all.
Building a Strong Missing Participant
Policy
Here are six steps that we believe
are useful for building a strong missing
participant policy, and in establishing the
framework that guides efforts to locate
participants.
1. Involve the Team: When establishing
a missing participant policy, it's a
good idea to Identify and involve the
team responsible for locating missing
participants, as they have practical experience
and will ultimately be relied
upon to adhere to the policy.
2. Clearly Define " Missing " Partici40
ISSUE
2 2024 | 401kSpecialist.com
" A weak or
nonexistent
missing participant
policy could
expose sponsors to
unwanted scrutiny
from a regulator,
or even lawsuits
and penalties. "
pants: This is a vitally important step,
as the definition of who is actually
" missing " can vary. Your definition
should be as clear as possible and
should identify specific signs of missing
participants (ex.-returned mail,
an uncashed distribution check, no
recent activity, etc.).
3. Identify Procedures to Minimize
Missing Participants: Dealing with
missing participants is not simply
about searching, it should also include
preventative measures to minimize
their numbers. These measures can
include ongoing efforts to communicate,
educate and actively encourage
participants to keep their contact
information updated.
4. Define Search Procedures: This
includes the type and frequency of
searches, and the escalation of search
intensity for participants approaching
retirement age or participants with
larger account balances. It's important
to strike a balance between effectiveness
and cost, and vary the intensity
based upon the different facts and
circumstances.
5. Identify Search Documentation
and Retention: Maintain clear
records of all search efforts undertaken
for each missing participant.
Document the date, type of search
conducted, and the results. Retention
policies should comply with relevant
regulations.
6. Conduct Annual Policy Reviews:
Conduct annual reviews of the missing
participant policy to ensure it remains
effective and adapts to evolving technology,
best practices, and emerging
regulatory guidance.
To help in getting started, we've prepared
a sample template for a missing participant
policy available to download here.
A Strong Policy Benefits Everyone
A strong missing participant policy
benefits everyone involved. Plan sponsors
fulfill their fiduciary duty, mitigate administrative
burdens, and protect their plan's
tax-qualified status. Employees have a
better chance of reconnecting with their
retirement savings and achieving retirement
security. By establishing a comprehensive
and well-documented policy with a
dedicated team, plan sponsors can ensure
they are taking responsible steps to find
missing participants and to safeguard their
financial future.
Tom Hawkins is Senior Vice President, Marketing
and Research with Retirement Clearinghouse.
http://www.401kSpecialist.com
401(k) Specialist Issue 2 - 2024

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