A significant number of plan participants don’t keep track of their benefits or respond to communications. SECURE 2.0 provides for auto-portability of small plan accounts-that is, a procedure for moving them to plans of new employers unless the participant opts out. But what about accounts too large to be distributed or transferred without participant consent? In this article in Bloomberg’s February 3 Benefits & Executive Compensation News, Carol Buckmann comments on another potential solution created by SECURE 2.0, a lost and found database to be established and maintained by the Department of Labor.
After pointing out that the inability to connect former participants with their benefits is a longstanding problem for plan sponsors, and “can involve an extensive , costly search’ that may turn up no results”, Carol comments that “ a database can only go so far” to fix the problem because “[i]t may mean workers will have to know they have an old account or even what the name of the former employer or account recordkeeper is.”
The article also points out the the effectiveness of the database will also depend on how frequently the Department of Labor updates it.
While we don’t yet know the details of how this lost and found will operate, it is unlikely to replace a plan sponsor’s fiduciary obligation to make all reasonable efforts to try to find former participants who haven’t updated their contact information.