Employer groups support creation of PBGC missing participant program for individual account plans

The ERISA Industry Committee (ERIC), the Plan Sponsor Council of America (PSCA), and the U.S. Chamber of Commerce have submitted comments to the Pension Benefit Guaranty Corporation (PBGC) supporting the agency’s efforts to implement a missing participants program for 401(k) and similar plans.

The group letter was in response to a PBGC “Request for Information” (RFI) seeking comments from the public to assist it in making decisions about implementing a new program to deal with the benefits of missing participants in terminating individual account plans (see Pension Plan Guide Newsletter, Report No. 1998, July 15, 2013). The Pension Protection Act of 2006 (PPA) directed the PBGC to create a program whereby plan administrators of defined contribution plans could transfer a missing participant’s benefits to the PBGC upon the termination of the plan.

“ERIC believes that a missing participant program run by the PBGC would create a win-win situation for both sponsors and participants, as terminating plans oftentimes cannot find lost participants, and participants many times don’t know where to look for lost benefits or cannot find their former plan,” said Kathryn Ricard, ERIC’s senior vice president for retirement policy, in a separate statement.

In responding to a series of questions in the RFI, the letter explained that the group believes there would be significant demand for a missing participants program, as plan sponsors are frequently unable to find IRA providers to accept smaller account balances, particularly those with less than $1,000.

“We anticipate that many fiduciaries would be interested in using services provided by the PBGC, particularly for smaller accounts. However, the demand for such services would be impacted by the fees charged by the PBGC and any regulatory burden that was imposed,” Ricard said.

The group letter recommended that the PBGC create a program whereby fiduciaries of terminating plans that transfer the accounts for missing participants to the PBGC can be confident that: (1) the funds will be handled appropriately; (2) the account will be charged no more than reasonable fees; (3) the participant (once found) will be able to obtain an accounting of the manner in which their funds have been handled by the PBGC; and (4) the administrative burden is not significant.

The group recommended that any program be optional, as provided in the PPA. The group also encouraged the PBGC to coordinate with the Department of Labor to provide fiduciary relief for plans that use the missing participants program. However, they emphasized that the PBGC should not delay the creation of the program in order to obtain this relief.

Source: ERIC news release, August 20, 2013.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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