Overview of the Proposed Missing Participants Program for Defined Contribution and Other Terminated Plans
The Pension Benefit Guaranty Corporation is proposing to expand its existing Missing Participants Program to cover terminated 401(k) and other defined contribution plans and certain defined benefit plans that aren't currently covered by the program.
For over 20 years, PBGC's Missing Participants Program has connected people - missing when their pension plans terminated - to their retirement benefits. Currently, the program is open only to PBGC-insured single-employer plans.
Under PBGC's proposal, the Program would expand to cover missing participants in terminated defined contribution plans (such as 401(k) plans and profit-sharing plans). Instead of establishing an IRA at a financial institution for each missing participant account, plans would have the option of transferring benefits to PBGC. PBGC would then hold the money, add the missing participant to its online searchable database, and periodically search for the participant. Participant accounts would not be diminished by ongoing maintenance fees or distribution charges and would be paid out with interest. PBGC anticipates the expanded program will be implemented in 2018, after receiving public comments and publication of a final regulation.
PBGC is also proposing modest changes to the way the program works for PBGC-insured single-employer plans. The changes relate primarily to how plans determine the amount of money to transfer to PBGC, better protection of key features of a participant's benefit (e.g., early retirement subsidies), and reducing the burden of transferring benefits to PBGC. The expanded program would cover PBGC-insured multiemployer plans that close out and certain defined benefit plans that aren't insured by PBGC (i.e., small plans sponsored by professional service organizations). PBGC expects limited usage by these plans.
- Read the related news release: PBGC Proposes Expanded Missing Participants Program to Include Terminated 401(k) and Other Plans
- Read the Proposed Rule
To learn more, see the Frequently Asked Questions
Missing Participants in Terminated Plans FAQs on PBGC's Proposal
Why is PBGC proposing a missing participants regulation?
Since 1996, PBGC has located thousands of participants who were owed benefits from terminated single-employer defined benefit pension plans. Congress authorized PBGC to expand its Missing Participants Program to include missing participants in the following types of terminating plans:
- Most defined contribution plans such as 401(k) and profit sharing plans.
- Multiemployer defined benefit plans covered by PBGC's insurance program.
- Small professional service defined benefit plans that are not covered by PBGC's insurance program (such as plans of medical or dental practices).
Will terminating plans be required to use PBGC's Missing Participants Program?
- The program is voluntary for defined contribution plans and defined benefit plans not covered by PBGC insurance.
- The program remains mandatory for PBGC-insured single-employer plans and will be mandatory for PBGC-insured multiemployer plans. Upon termination, these plans must either:
- Transfer the benefits of missing participants to PBGC; or
- Purchase annuities and send PBGC information about the annuity provider.
How will the program work for defined contribution plans?
- There are two ways for a terminated defined contribution plan to use the program:
- Transfer the accounts of missing participants to PBGC; or
- Send PBGC information about where accounts of its missing participants were transferred. For example, contact information for the IRA provider where accounts were established.
As is the case for the defined benefit Missing Participants Program, for the proposed defined contribution Missing Participants Program, PBGC will attempt to locate all reported participants and connect them with their benefits. And, those participants that can't be located right away will be added to our searchable database of missing participants so that they (or their beneficiaries) can easily find out if we have their benefit (or know where it is).
What are the benefits to plans and participants of PBGC's proposed defined contribution Missing Participants Program?
- Benefits of any size can be transferred to PBGC.
- Low cost - Low one-time fee to transfer a benefit (no fee for transfers of $250 or less); no fees for account maintenance or benefit distribution.
- A centralized online searchable directory of missing defined contribution plan participants will make it easier to find a lost benefit.
- Transferred amounts grow with interest (at the Federal mid-term rate)
- Lifetime income available for balance transfers over $5,000.
Did PBGC coordinate with other federal agencies?
- Yes. PBGC worked closely with the Department of Labor, Internal Revenue Service, and the Department of the Treasury to harmonize the expanded Missing Participants Program with missing participant guidance from the other agencies.
What types of defined contribution plans could use the Missing Participants Program?
- The program covers common types of terminated defined contribution pension plans, specifically 401(k) plans, profit sharing plans, money purchase plans, target benefit plans, employee stock ownership plans, stock bonus plans, and Internal Revenue Code section 403(b)(7) plans. Abandoned plans defined under Department of Labor regulations will be able to use the Program if they met the same requirements applicable to other defined contribution plans. Some examples of plans not covered are governmental plans and church plans.
Does PBGC propose any changes to the current program for single-employer PBGC-insured defined benefit plans?
Yes. PBGC proposes some revisions and updates, most notably:
- Simplifying the rules for valuing transferred benefits and creating a user-friendly spreadsheet so that plan administrators can do the calculations themselves (as opposed to hiring an actuary).
- Preserving key features of a participant's plan, such as early retirement subsidies.
Under the proposal, will plans pay a fee to participate in the Missing Participants Program?
- Sending benefits to PBGC. A low, one-time fee (initially set at $35) will be charged for transferring a participant's Defined Benefit or Defined Contribution benefit to PBGC. There will be no fee for transfers of $250 or less. There are no ongoing maintenance fees and there is no charge to distribute benefits.
- Sending information to PBGC. There is no fee for sending PBGC information about where a missing participant's benefit is being held.
Where can I find more information about this proposal?
- The preamble to the proposed regulation provides background and discusses the proposal.
- The proposed draft instructions provide useful information about how the program will work. There is a separate packet of forms and instructions for each of the four types of plans that will be covered by the expanded Missing Participants Program.