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PBGC’s Missing Participant Program Expanding to Terminated 401(k)s

The Pension Benefit Guaranty Corporation has expanded its missing participants program to terminated 401(k) and other plans in an effort to make it easier for people to locate their retirement benefits after their plan terminates.

The final rule, which was published in the Dec. 22 Federal Register, expands the current program to cover terminated DC plans, multiemployer pension plans and small professional service DB plans with 25 or fewer participants. The PBGC issued a proposal to expand the missing participants program on Sept. 20, 2016.

The expanded program is voluntary for DC and small professional service plans, and will be available for plans that terminate on or after Jan. 1, 2018. Prior to the expansion, the program was open only to terminated PBGC-insured single-employer DB plans.

Under the final rule, beginning in January, terminating DC plans will have the option of transferring missing participants’ benefits to the PBGC instead of establishing an IRA at a financial institution.

The PBGC notes that participant accounts “will not be diminished” by ongoing maintenance fees or distribution charges, and it will pay benefits with interest when participants are found. Since the expanded program applies only to plans that terminate after 2017, the PBGC expects it will be several months before new missing participant names are added to the existing online directory.

To address concerns about the possibility of cherry-picking, the final regulation requires that a DC plan that chooses to participate in the program and elects to be a transferring plan must transfer the benefits of all its missing participants into the program.

The final rule also modifies the criteria for being “missing,” provides additional flexibility in the “diligent search” rules for DB plans, and simplifies the existing procedures for DB plans to determine the appropriate sum to transfer to PBGC on behalf of a missing participant or beneficiary.

PBGC's Missing Participants Program webpage has additional information on the new program, including forms and instructions.