Assistance forthcoming to locate missing participants of terminated 401k plans (article)
Historically, the mission of the Pension Benefit Guaranty Corporation (PBGC) is to protect participant benefits resulting from failed pension plans, traditionally, defined benefit plans. Recently, the PBGC announced proposed rules, together with an overview and FAQs, that would establish a program to connect with missing participants of terminated defined contributions plans, specifically, 401(k) plans, profit sharing plans, money purchase plans, target benefit plans, employee stock ownership plans, stock bonus plans, and IRC Section 403(b)(7) plans.
Generally, when a defined contribution plan, such as a 401k plan, terminates, the plan sponsor can rely on four methodologies for finding missing participants, in accordance with the DOL’s Employee Benefit Security Administration’s Field Assistance Bulletin (FAB) 2014-01 (see In Search of Missing Plan Participants (Benefit Beat, 9/9/14).
Under the PBGC’s missing participant proposal, a plan sponsor of a terminated 401k plan could either transfer the accounts of missing participants to PBGC; or provide PBGC information about where accounts of its missing participants were transferred, such as contact information for an IRA provider where accounts were established. The program would be strictly voluntary yet provides a low cost option for finding missing participants while protecting their benefits as a result of a terminated plan.
Comments on the proposed rules must be submitted by November 21, 2016. Once finalized, the PBGC anticipates making the missing participant program available in 2018 (for plans that terminate after 2017).
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.