On January 14, 2024, the Department of Labor (DOL) published a Field Assistance Bulletin (FAB) 2025-01 announcing a “non-enforcement” policy with respect to the transfer of small defined contribution (DC) plan balances ($1,000 or less) belonging to missing participants to a state unclaimed property fund.

Background

In 2021, the DOL published Field Assistance Bulletin 2021-01¹ and best practices guidance² related to missing participants. Plan sponsors, on occasion, must deal with missing plan participants and beneficiaries, and what to do with their plan balances. Current DOL regulations provide a rollover to an IRA as a fiduciary safe harbor for distributions over $1,000 from terminated or abandoned DC plans for missing participants (and those who do not otherwise affirmatively elect distributions). Additionally, under FAB 2021-01, the DOL will not pursue ERISA violations against plan fiduciaries of terminating DC plans if they transfer the plan balance of a missing or nonresponsive participant or beneficiary to the Pension Benefit Guaranty Corporation’s (PBGC’s) Defined Contribution Missing Participants Program rather than to an IRA, certain bank accounts, or to a state unclaimed property fund. For amounts of $1,000 or less, FAB 2025-01³ addresses plan transfers to a state unclaimed property fund.

While the DOL has identified IRAs as the preferred destination for a distribution owed to a missing participant or beneficiary from a terminated DC plan, an acceptable alternative would be transferring a distribution to a state unclaimed property fund or an interest-bearing federally insured bank account under certain circumstances. Before making such a transfer is prudent and in the best interest of the plan participant or beneficiary.

FAB 2025-01

For transfers of small benefits of $1,000 or less to a state unclaimed property fund, the DOL will not pursue violations under ERISA provided a plan sponsor follows the guidelines of FAB 2025-01.

To take advantage of FAB 2025-01 the plan fiduciary must:

• Determine that transfer to a state unclaimed property fund is prudent.
• Have implemented a prudent program to find missing participants consistent with DOL’s Best Practices.
• Transfer the missing individual’s balance to the state fund based on their last known address.
• Ensure the plan’s SPD explains the transfer program and possibility of this sort of transfer, and provides a plan contact for further information.
• Determine the state fund qualifies as an “eligible state fund.”

Eligible State Fund

To be an eligible state fund, the fund must meet the nine criteria detailed below. A plan fiduciary may rely on a representation by a State Treasurer that the state operates an unclaimed property fund that meets all of the following conditions.

To be an eligible state fund, the fund must:

• Act as the custodian of the funds of affected participants, their beneficiaries, and their heirs and allow for claims for unclaimed property in perpetuity.
• Not charge any fees against (or otherwise reduce) the transferred amount.
• Maintain at no charge a searchable website showing participant and plan identification information and that permits an electronic claims process.
• Publicly provide the ability to make inquiries by physical mail, electronic mail and telephone.
• Participate in the National Association of Unclaimed Property Administrators MissingMoney.com website or similar website operated under the auspices of the National Association of State Treasurers, Inc.
• Provide streamlined processing for small claims.
• Diligently search, annually, for an updated address for amounts over $50, and, when an updated address is obtained, notify the owner.
• Permit a plan to pre-pay a re-appearing participant directly and then get reimbursement from the state fund.
• Participate in the States’ Unclaimed Property Clearing House of the National Association of State Treasurers, Inc.

Takeaways for Sponsors

From a plan governance perspective, plan sponsors should have a documented policy in place they follow that addresses missing participants and their plan balances that aligns with the DOL’s best practices and FABs on the subject. Regarding FAB 2025-01, to take advantage of this non-enforcement policy, the plan sponsor (or acting fiduciary) must implement a missing participant program consistent with DOL’s Best Practices for Pension Plans.

Sources:

1. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2021-01

2. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/retirement/missing-participants-guidance/best-practices-for-pension-plans

3. https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/guidance/field-assistance-bulletins/2025-01.pdf