DOL gives more leeway to transfer missing participants’ benefits 

February 18, 2025

A new temporary enforcement policy lets fiduciaries of ongoing retirement plans transfer small benefits owed to missing participants to a state unclaimed property fund without fear of Department of Labor (DOL) enforcement action. Field Assistance Bulletin (FAB) 2025-01 explains that this policy only applies to benefits — including uncashed checks — with a present value of $1,000 or less. The FAB requires fiduciaries to meet a series of other conditions to qualify for this relief. While prior DOL guidance has allowed fiduciaries of terminating plans to transfer missing participants’ benefits to state unclaimed property funds in some instances, this is the first piece of agency guidance specifically addressing transfers from ongoing retirement plans.

Missing and unresponsive participants have long posed challenges for retirement plan fiduciaries. Recent DOL investigations have often focused on missing participants, and the agency has issued best practices for plan sponsors and administrators trying to locate these individuals. However, despite making reasonable efforts, fiduciaries may not be able to find all missing participants or get unresponsive participants to take action (for example, to provide payment instructions or cash a check). The Pension Benefit Guaranty Corp. (PBGC) missing participant program accepts transfers from terminating defined benefit (DB) and defined contribution (DC) plans, but this program isn’t available to ongoing plans.

In 2019, the ERISA Advisory Council recommended that DOL issue guidance allowing retirement plan fiduciaries to voluntarily transfer amounts attributable to missing participants’ uncashed benefit checks to state unclaimed property funds. Previous DOL guidance on missing participants in terminating DC plans indicated a general preference for rolling over benefits to IRAs in the participants’ names. DOL considered this approach preferable because the alternatives — transferring the money to an interest-bearing federally insured bank account or state unclaimed property fund — could result in significant negative tax consequences for the participant. Therefore, the fiduciary would have to decide that the transfer was appropriate despite these negative consequences.

However, for small amounts, fiduciaries may not be able to find an IRA custodian willing to accept the benefits, and even if they do, the associated fees may exceed the return, leading to a reduction in the account balance. Further, certain features of state unclaimed property funds may make them more likely to reunite the participant with their benefits. IRS Rev. Proc. 2020-46 identified circumstances in which amounts distributed to state unclaimed property funds may later be rolled over to a qualified plan or IRA on a pretax basis, thus mitigating many of the negative tax consequences. DOL believes these considerations justify the agency’s new temporary enforcement policy.

DOL is adopting the nonenforcement policy in anticipation of issuing more formal guidance on voluntary transfers to state unclaimed property funds in connection with the new Retirement Savings Lost and Found database. The database lets retirement plan participants search for their lost retirement benefits. Until such guidance is issued, DOL won’t take action against fiduciaries who voluntarily decide to transfer missing or nonresponsive participants’ benefits under the following conditions:

• The present value of the benefit (disregarding any outstanding plan loans but including any rollover contributions) must not exceed $1,000. The FAB doesn’t specify how to determine the present value for non-account-based benefits, like those payable from traditional defined benefit pension plans.
• The participant cannot be located despite the fiduciary’s having implemented a prudent program to search for missing participants consistent with DOL’s best practices.
• The summary plan description explains that the plan may make such transfers and includes contact information for a plan official who can provide information about the state funds to which benefits are transferred.
• The plan fiduciary determines that the state unclaimed property fund is a prudent destination for the participant’s benefit.
• The state unclaimed property fund is offered by the state of the participant’s last known address.
• The state unclaimed property fund qualifies as an “eligible state fund” according to the guidelines in the FAB. These guidelines comprise nine operational requirements (for example, the fund must maintain a free, searchable online database and permit an electronic claims process). Absent actual knowledge to the contrary, the plan fiduciary may rely on a representation by a state treasurer that the fund qualifies.

However, DOL may still pursue ERISA violations for failure to maintain plan and employer records. The enforcement policy is only binding on DOL and wouldn’t prevent participants and beneficiaries from potentially pursuing claims under ERISA’s civil enforcement provisions.

• Field assistance bulletin 2025-01 (DOL, Jan. 14, 2025)
• Missing participants — best practices for pension plans (DOL, Jan. 12, 2021)
• Rev. Proc. 2020-46 (IRS, Oct. 16, 2020)

• DOL goes live with SECURE 2.0 lost-and-found data collection (Dec. 12, 2024)
• DOL issues guidance on missing participants (Jan. 19, 2021)