‘Whatever Happened to… Our Retirees and Beneficiaries?’

By John Iekel • July 13, 2017 • 0 Comments
Keeping abreast of the whereabouts and life status of retirees and beneficiaries — and even terminated vested participants — are increasingly important fiduciary responsibilities. A recent newsletter discusses why this is the case and how it may be accomplished.

In “Fiduciary Responsibilities: Wanted Dead or Alive,” a piece appearing in Milliman’s DB Digest, Verna Brenner points out that doing so affects the bottom line for an employer, as well as that of the plan and its reason for being — and benefits retirees and beneficiaries.

When a company and plan fail to keep track of the life status of retirees and beneficiaries, it risks continuing to send pension payments to retirees and beneficiaries, Brenner notes, which can create “an overpayment predicament.” Further, Brenner notes, there is a legal obligation to recover amounts paid improperly to participants who have died. And while employees who have been terminated may no longer be on the payroll, a plan still must keep track of them if they are vested participants in order to pay benefits, she adds.

What to Do

Brenner suggests steps by which an employer and plan may better keep track of retirees, beneficiaries and terminated vested participants. Among them:

Set up a death monitoring and audit process to help eliminate or minimize overpayments. Brenner notes that third-party search firms can be of assistance in this effort. She also notes that there are public databases from which such information can be gleaned, such as those run by the IRS, Departments of Motor Vehicles, courts and the Social Security Administration (SSA). She also cautions that there are limits to the usefulness of the Social Security Death Master File, since not all states report deaths to the SSA.

Maintain current contact information to aid in keeping life status up to date and effectively discharge the duty to communicate.

Have an address search process in place to fulfill the fiduciary responsibility to provide participant communications and to reduce Pension Benefit Guaranty Corporation (PBGC) premium costs for terminated participants.

Develop a monthly process to identify participants as they near such milestones as retirement age or age 70½.

Monitor outstanding checks to help keep track of participants’ life status.

Provide clear and consistent instructions to plan participants regarding how they can provide the plan with updated addresses and contact information.