MetLife’s Lost Client Problem Highlights Pension Guidance Gap

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Madison Alder

MetLife recently said it discovered after an internal review that it lost track of thousands of clients who were owed a pension benefit.

The revelation is likely to cause employers sponsoring pension and 401(k) plans to take a look at how they deal with locating retirees that have fallen off the grid. But as companies re-examine the processes they use for finding these retirees, they won’t find a lot of clear federal guidance.

The Labor Department said two months ago that it’s increasing its focus on ensuring that workers are connected with their pension checks. The agency has focused primarily on those companies that didn’t make sufficient attempts to contact participants of their pension plans.

In those two months, the DOL has audited employers to ensure their methods for locating lost participants is thorough. MetLife wasn’t part of that auditing process—its discovery was part of the company’s decision to do a self-audit knowing that the DOL was placing increased emphasis on employers’ responsibility to find lost participants.

“It’s not a matter of if you’re going to be audited, it’s when,” Sue McDonald, president of Pension Benefit Information LLC, told Bloomberg Law. MetLife is among the companies that have hired the California-based research service to help locate their missing participants.

There is an increased interest in tackling this issue, McDonald said. PBI assisted more than 15 clients that were audited by DOL since the agency started its push to find missing participants several years ago.

Fortunately for those clients, the process PBI uses to search for plan participants was documented. McDonald said her organization has a bit of an advantage on that front, as it knows what DOL is looking. For many other plan sponsors, the process might not be as simple.

DOL hasn’t issued formal guidelines about employers’ responsibilities to find plan participants. What many employers reference, and what DOL’s Employee Benefits Security Administration points them to, is guidance in a 2014 bulletin about the participant location responsibilities for employers that have terminated their defined contribution plans. There’s no guidance specific to employers that haven’t terminated their plans.

“EBSA works with fiduciaries to ensure they have mechanisms in place to contact plan participants and beneficiaries as they become eligible to receive benefits,” an agency spokesman told Bloomberg Law in an email.

The agency said its investigators share successful methods for contacting plan participants and beneficiaries with the plan representatives it works with. EBSA specifically pointed to “using certified mail; checking related plan and employer records; checking with designated plan beneficiaries; using free electronic search tools; and considering cost-effective commercial search tools and locator services” as examples of methods from its bulletin that employers can use.

Formal Guidelines Needed

The business world has called for the DOL to issue formal guidelines. That call is unanswered, for now.

The American Benefits Council, an employer advocacy group, sent a letterto EBSA in October 2017, asking the agency to outline the fiduciary responsibilities that plan sponsors have when dealing with missing participants.

“There’s no consensus on what they should be doing,” Jan Jacobson, senior counsel for retirement policy at ABC, told Bloomberg Law.

What’s adding to the confusion is that the Internal Revenue Service gave its auditors guidance on missing participants, “but they don’t necessarily match up” with the DOL guidance, Jacobson said.

The DOL used to have guidance that told employers to use programs through the IRS and Social Security Administration that would forward letters to plan participants using information attached to their Social Security number, but both programs were eliminated several years ago, she said.

Among the concerns of those in the business community are proper methods of finding missing participants, like using social media, or asking beneficiaries where to find them, Jacobson said. Both can bring up potential privacy issues.

Finding Participants

Some methods for finding participants, like the one MetLife said it had used, don’t always work.

MetLife would contact its clients twice before putting the clients’ money in its reserves. This method was ineffective, the company said in a federal filing last week.

Prudential Financial Inc., another insurance provider responsible for pension annuities, said last week in a filing it was “reviewing this issue closely,” indicating there could be a “greater standardization” of industry practices on the horizon. Prudential made the point of saying that its number of missing participants was relativity small compared to competitors.

At a Bank of America Merrill Lynch Insurance Conference Feb. 15, MetLife CEO Steve Kandarian said he “can’t believe” his company is the only one that’s had trouble contacting participants of pension plans who are owed a benefit.

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