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Investment insights from Capital Group

The problem of "missing" retirement plan participants—those with a balance in a former employer's qualified retirement plan who have lost contact with the plan—has been a focal point for regulators in recent years. 

Workers can lose track of small retirement plan balances as they change jobs throughout their careers. This can cost them hard-earned savings and can be challenging for plan sponsors, who have a fiduciary obligation to make a good-faith effort to find their missing participants. Under the Employee Retirement Income Security Act (ERISA), plan sponsors must establish a prudent process and take appropriate steps to locate former employees and distribute their retirement benefits.

The U.S. Department of Labor (DOL) regularly conducts investigations into plan sponsors who may not be doing all they can to find their missing participants. As of November 2024, enforcement efforts had recovered more than $7 billion for missing participants and beneficiaries since 2017, according to the DOL’s Employee Benefits Security Administration (EBSA). Fortunately, evolving regulations are helping sponsors address this problem.

Why do participants go missing?

It isn’t unusual for workers to hold many jobs throughout their careers, potentially leaving balances in former employers’ retirement plans as they go. People born in the later years of the baby boom, from 1957 to 1964, and now in or nearing retirement, held an average of nearly 13 jobs between the ages of 18 and 56, according to an August 2023 release of survey results from the U.S. Bureau of Labor Statistics. Nearly half of those jobs were held decades ago when this cohort was between the ages of 18 and 24. The propensity to change jobs is even greater for the younger Millennial and Gen Z generations.

So, how can workers forget about their retirement benefits? And how do plans lose track of their participants? As time goes by, workers may not think to contact their former employers with updated personal information. Some participants, especially those automatically enrolled, may not even realize they have an account. Meanwhile, plan sponsors may lose track of employees when they move to a new residence, get married or divorced, change their name or pass away. Missing participants can also result from administrative issues following corporate mergers, acquisitions or bankruptcies, recordkeeper changes or even a change to a plan sponsor's name.

What do regulators say?

Regulations are evolving to help plan sponsors address the problem. The DOL issued guidance in January 2021 that detailed steps plan fiduciaries should consider taking to find their missing participants. While the DOL guidance provided helpful advice, it fell short of establishing a “safe harbor” that would protect plan fiduciaries from liability under all circumstances. It did, however, allow a plan sponsor to determine appropriate search measures, including balancing the size of an account against the cost of the search efforts.

Another initiative created a clearinghouse to help connect missing participants with the retirement benefits they are owed. In late 2024, EBSA launched an online database, the Retirement Savings Lost and Found. Created under the SECURE 2.0 Act of 2022, the database enables plan participants and beneficiaries to search for retirement plans where they may have unclaimed or forgotten accounts.

Another important development in 2025 is “auto portability,” which refers to the automatic transfer of small retirement savings balances to a new employer’s retirement plan. However, until Portability Services Network, LLC—a consortium of recordkeepers that facilitates this process—expands to include all recordkeepers, plan sponsors maintain their responsibility to keep track of participants.

Plan sponsors also have the option of transferring missing participants’ benefits of $1,000 or less to state unclaimed property funds. In early 2025, the DOL said that under certain conditions, it would not take enforcement action against plan fiduciaries that do so.

Finally, what happens when a retirement plan needs to make a required minimum distribution (RMD) to a missing participant who has reached the age at which Internal Revenue Service (IRS) rules require it? While the failure to make timely required RMDs is among the potential qualification issues for a plan, the IRS has addressed this issue as it relates to missing participants. IRS field guidance directs auditors not to challenge a qualified plan for failure to make an RMD to a missing participant, provided certain steps have been taken to locate the participant.

Tips for success
 

• Ask the plan’s service providers. Many plan sponsors believe that their plan’s third-party administrator and/or recordkeeper are responsible for locating missing participants. But unless these providers have agreed to provide such a service, the plan sponsor is responsible. Therefore, the plan sponsor should ask service providers about their policies and procedures related to locating missing participants. 
  
  
• Consider a third-party service. Plan sponsors may consider delegating the responsibility to a third-party service provider that specializes in finding missing participants. It is important to remember that, while sponsors may delegate responsibilities to third parties, it remains the sponsor’s fiduciary duty to ensure that the third party’s procedures are adequate.
  
  
• Establish a process. If the plan sponsor retains the responsibility for managing missing participants, the sponsor will need to determine the steps needed to locate them. These steps should be documented and followed. Having sufficient documentation could be especially important in the case of a DOL audit.
  
  
• Watch for early red flags. The longer participants are missing, the more difficult it can be to find them. Be aware of warning signs like distribution checks that go uncashed or quarterly statements or service emails that are returned as undeliverable. Many recordkeepers can provide a report that lists participants with uncashed checks and undeliverable mail and/or email that can serve as a starting point for managing missing participants.