Background

The inability of retirement plans to find participants and beneficiaries entitled to benefits and for participants and beneficiaries to trace their benefits after acquisitions and mergers has been a shared concern of plan sponsors, participants and the federal government. Participants groups and the DOL have long noted that participants and beneficiaries may not be receiving benefits to which they are entitled. Plan sponsors have pointed out the practical problems and the lack of specific regulatory guidance. In 2021, the DOL issued best practice guidelines for plans to follow, which we discussed in our January 14, 2021 insight, “New DOL Guidance on Missing Participants in Retirement Plans,” and has raised the issue on audits.

The SECURE 2.0 Act created a Lost and Found Registry, housed at the DOL, to partially address the problem. The SECURE 2.0 Act approach does not provide for the transfer of the benefits of missing participants. (The PBGC offers such transfers but only for missing participants in terminating DB and DC plans.)

Much of the information needed for the Registry is already in government hands. Plans are required to transmit Form 8955-SSA to the IRS each year. The IRS then forwards the information to the Social Security Administration (SSA) pursuant to specific disclosure provisions. That form contains, among other things, information on who still had benefits due from the plan after separation. The SSA shares this information with participants when they are eligible for Social Security.

However, the ICR states that, because the information on Form 8955-SSA is confidential tax information, the IRS has advised the DOL that the tax disclosure rules prevent the IRS from sharing the information with the DOL for purposes of the Registry. The IRS’s determination that it could not provide tax information to the Registry left the DOL facing a quandary of how to get the data.

Information request

The ICR asks plans to voluntarily provide to the DOL directly not only the same information that is reported on the Form 8955-SSA but also additional information. The additional information includes information on distributions, automatic rollovers and annuity purchases going back to the time the plan was first established or when the plan first became subject to ERISA, if shorter.

The ICR breaks the information request into three categories:

• Data from plans with separated vested participants. This section requests information on separated participants who were fully paid in a form other than an annuity and those paid in the form of an annuity. It also requests information on vested participants not fully paid out, and further information on any of those over normal retirement age who have been unresponsive or whose contact information the plan believes is no longer accurate.
• Data from plans that distributed small benefits pursuant to the automatic rollover rules. This request is aimed at obtaining data on the IRAs to which participant payments were waived.
• Data from plans that purchased annuities from insurance companies. This request is aimed at obtaining information about the issuer of the annuity contract and former sponsors or administrators of the plan that purchased the contracts.

The DOL intends initially to provide a special portal on its E-FAST filing system for the Form 5500 for submission of this voluntary information. The DOL promises to keep the data protected (despite it being collected with the public Form 5500). The DOL is looking at other methods through which plans may submit the information in the future.

Implications for plan sponsors

Much of the information that the DOL is requesting is data subject to various privacy protections. Consequently, plan sponsors are concerned about disclosure liability.

An additional issue is the request is for distribution information dating back to ERISA. Many, if not most, plans do not maintain that information, at least not in a readily accessible form.

The legal risks and data collection challenge are likely to make many plan sponsors hesitant to cooperate with the DOL’s data request.