The United States Department of Labor (DOL) has released Field Assistance Bulletin 2025-01 (the Bulletin), providing much-needed guidance to fiduciaries of retirement plans covered by the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Bulletin temporarily permits ERISA fiduciaries to transfer retirement benefits of under $1,000 to a state unclaimed property fund. The last formal guidance in this area came under DOL Field Assistance Bulletin 2014-01, which indicated that the preferred method for paying out benefits to missing participants in terminating defined contribution plans is via a rollover to an individual retirement account (IRA) opened in the participant’s name. In practice, however, many employers sponsoring retirement plans have encountered difficulties finding IRA providers willing to accept small accounts, and employers have also been wary of providers that do accept those rollovers due to the risk that the fees charged would quickly deplete the account.
The Bulletin describes a DOL nonenforcement policy for fiduciaries that decide to transfer the account balances of missing participants (including uncashed checks) to a state’s unclaimed property fund, as long as the amount of the benefit is $1,000 or less. In addition, to qualify for this nonenforcement treatment, the plan’s fiduciaries must ensure that the state’s unclaimed property fund is a prudent destination for the participant’s benefit payment. The fiduciary must also have a prudent program in place to attempt to locate the missing participant, and the state selected for the transfer of the unclaimed property must be the state of the participant’s last known address. Finally, the state unclaimed property fund must meet other DOL requirements, including a requirement to update the plan’s summary plan description to include the possibility of transfer of benefits to an unclaimed property fund. While the Bulletin indicates that this nonenforcement policy is temporary pending further guidance, it does not provide an end date to the policy.
The treatment of missing participants under ERISA-covered retirement plans has been a hot-button issue in DOL investigations, with the DOL often taking the position that employers are not working hard enough to track down these missing participants and pay out their benefits. Retirement plan accounts belonging to missing participants can also result in additional service provider fees if those fees are based on the number of plan participants. The Bulletin, albeit temporary, provides a welcome opportunity for ERISA fiduciaries to have these small accounts removed from their plans, avoiding any potential DOL scrutiny of those missing participants.
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