The Search for Missing Participants Continues: DOL Guidelines and Best Practices


“If at first you don’t succeed, try, try again.” It may not be the mantra of plan sponsors, but this old adage certainly sums up the Department of Labor’s (DOL’s) approach to the fiduciary duty of searching for missing plan participants. Are You Looking for Missing Participants?

Earlier this year, the DOL released three documents on missing participant guidance that provides additional guidance to employers in their quest to locate retirement plan participants. Whether active or terminated, retirement plans are designed to provide benefits and it is the plan sponsor’s responsibility to routinely search for missing participants.

Magnifying Glass for Missing Participants Concepts

Best Practices for Your Search

The DOL noted that plan fiduciaries should consider what practices will yield the best results for their retirement plan, taking into account the participant population, size of the particular participant’s account balance, and the cost of search efforts.

These are the best practices the agency recommends for searching for missing participants:

  • Glean participant, beneficiary and next of kin/emergency information from other benefit plans and employer/payroll records
  • Check with emergency contacts and designated beneficiaries
  • Take advantage of free online search tools, including social media (e.g., Facebook and Twitter) and search engines, or use proprietary internet search tools
  • Use a credit-reporting agency or commercial locator service, or review public records that may include real estate taxes or mortgage information
  • Attempt contact via certified mail or a private delivery service to the last known address, or attempt contact by email, text or social media
  • Search death records and obituaries if participants have not responded; then send communications to beneficiaries, as appropriate
  • Reach out to employees or union officials who worked with the missing participants
  • Register missing participants on public and private pension registries, such as the National Registry of Unclaimed Benefits, and inform participants of the registry

Documenting policies and procedures related to locating missing participants and beneficiaries, including key decisions and actions that you’ve taken to implement those policies, is considered a best practice by the DOL. In addition, the agency advises plan sponsors to ensure recordkeepers are performing agreed-upon services and implementing effective communication practices with participants.

Avoid the Red Flag Issues

By conducting regular searches, the DOL states that plan sponsors can avoid these “red flag” examples of problematic missing participant issues:

  • The plan has more than a “small number” of missing or non-responsive participants
  • There’s a considerable number of participants who terminated employment with a vested benefit and reached normal retirement age, but have not started their pension benefits
  • The plan’s records contain inaccurate, incomplete or missing census data and/or contact information, such as incorrect mailing or email addresses, missing phone numbers, partial Social Security numbers, missing birthdates or spousal information, or other “placeholder” entries are being used for birthdates or for names.
  • There is no evidence of sound policies and procedures for handling:
    • Undeliverable or returned mail
    • Checks that have not been cashed

There are several actions plan sponsors can take to prevent red flag issues, and as mentioned above, a key solution is to ensure the plan’s census information is current. The DOL also suggests these steps to reduce the number of missing participants:

  • From time to time, contact active and retired participants and beneficiaries to confirm or update contact information. This could include social media and next of kin/emergency contact information.
  • Simplify the ways for participants to update their contact information by:
    • Including contact information change requests in communications to participants
    • Allowing online changes to update contact information for participants and their beneficiaries
    • Prompting participants and beneficiaries to confirm or update contact information when logging onto the online account, and then following through to make those changes in the census data
  • Log undeliverable mail or email, and uncashed checks for follow-up
  • Pay close attention to mergers and acquisitions, or a change of recordkeepers. It is common for plans to lose track of participants during these events, and the DOL recommends sponsors make missing participant searches of the retirement plan, health and welfare plans and payroll records part of the collection and transfer of records.

Set Protocols to Communicate Effectively

Communication is the common denominator in resolving missing participant issues and the DOL suggests sponsors use these approaches when reaching out to participants and beneficiaries:

  • Use easy-to-understand language, offer non-English assistance, and encourage contact through the plan/plan sponsor website and toll-free numbers.
  • State prominently what the correspondence is about, and make it easily identifiable. For example, if a pension plan changes its name after the participant terminated employment, use the name of the plan that was in use while the participant was an active employee.
  • Let participants know how the plan can help consolidate defined contribution plan accounts or roll over IRAs.
  • During the onboarding and exiting processes, incorporate steps for the employee to confirm/update contact and other necessary information to calculate benefits, and remind them of the importance of maintaining current contact information.


Following the DOL’s guidance can help reduce your plan’s missing participants. For more information about implementing the best practices described in this article, contact Sheila Ninneman, JD, at, or Laura Guin, CPC, at

Published October 28, 2021

© 2021 Findley, A Division of USI. All Rights Reserved

This information is provided solely for educational purposes and is not to be construed as investment, legal or tax advice. Prior to acting on this information, we recommend that you seek independent advice specific to your situation from a qualified investment/legal/tax professional.

Window of Savings Opportunities with Backdoor Roth IRAs


Estimated reading time: 5 minutes

What is a mega backdoor Roth IRA? Can I do a backdoor Roth IRA in 2021? What is the limit to a backdoor Roth IRA? Is a backdoor Roth IRA worth it? Can I do a backdoor Roth every year?

Mega backdoor Roth IRAs have made headlines in recent months which likely means you have at least a few employees in your organization, especially highly compensated employees (HCEs), who are curious about the savings strategy and asking those kinds of questions. Understanding the strategy helps you answer their queries and provide guidance on the steps employees need to make the contributions.

Backdoor Roth IRA

Backdoor Roth IRA

To understand the concept that has become known as the mega backdoor Roth, it’s helpful to break down the terminology, starting with the Roth savings approach:

A Roth account refers to any account where retirement savings dollars are taxed initially when money is deposited into the account, but subsequent earnings and distributions are tax-free (assuming certain conditions are met). The Roth concept was created with the Roth IRA added by the Taxpayer Relief Act of 1997 (TRA 97) and extended to other retirement accounts beginning with the addition of Roth 401(k) accounts with the Economic Growth and Tax Relief Reconciliation Act of 2001.

Roth accounts can be more beneficial than traditional tax-deferred accounts if tax rates are expected to be higher during an individual’s retirement. These accounts can add an element of tax diversification if a portion of an account is Roth and another portion is a traditional tax-deferred account, which offers some protection against rising tax rates.

A backdoor Roth, as opposed to a mega backdoor Roth, refers to the ability to place money in a Roth account (historically, a Roth IRA) even if the individual is not otherwise eligible to make contributions directly into a Roth account. For the 2021 tax year, an individual earning more than $198,000 cannot make a full contribution into a Roth IRA or tax-deductible IRA and no contribution is allowed at all for individuals earning more than $208,000. Reduced income limits apply to tax-deductible IRA contributions for those covered by a retirement plan at work. However, an individual (regardless of income) can make a non-deductible contribution to a traditional IRA of up to the $6,000 annual limit. While the contribution receives no current favorable tax treatment, the income on contributions is tax-deferred until distributed.

As a result, these traditional IRA accounts typically offered limited value. This changed when a provision of TRA 97 sunset in 2010. TRA 97 introduced the concept of converting a traditional IRA to a Roth IRA by paying current income taxes on the amount converted. The ability to convert has a provision that precluded higher-income taxpayers from converting their traditional IRA contribution amount. That provision expired in 2010, and today, taxpayers of any income can make a non-deductible IRA contribution and then convert that amount into a Roth IRA.

Often, the conversion happens immediately after the contribution is made. It’s important to note that the conversion of non-deductible IRAs can create taxable income for any traditional IRA dollars that the taxpayer has saved.

A mega backdoor Roth takes the backdoor Roth to another level because the accounts may be part of an employer’s retirement plan. For decades, retirement plans have been allowed to permit employees to make after-tax contributions. From a tax perspective, the after-tax contributions are identical to non-deductible IRAs. However, these amounts are not limited directly to $6,000, but are limited in combination with other contributions by the Code 415(c) limit ($58,000 for 2021).

If an individual is deferring $19,500 in pre-tax and Roth deferral and receives employer contributions of $10,500, they can still make after-tax contributions of up to $28,000 ($58,000-$19,500-$10,500). However, there are numerous compliance issues (see the following discussion) that must be addressed before contributions of that size are permitted. Once in the plan, these after-tax amounts can either be converted to Roth dollars within the plan or distributed to a traditional IRA and then converted to a Roth IRA.

Setting a Mega Strategy

For employees who have more money to save after contributing the annual maximum to their 401(k)/403(b) accounts, your company’s retirement savings plan may provide a route to the mega backdoor Roth strategy if:

  • The 401(k)/403(b) plan allows after-tax contributions, and
  • In-plan Roth conversion option is allowed in the plan, or
  • In-service distributions or withdrawals that are not hardship withdrawals from the plan to a Roth IRA are permitted

This savings tactic comes with a variety of risks. Employees should be strongly encouraged to discuss backdoor Roth options with their financial advisors. They will need to make sure they can afford to proceed with the savings strategy, and they will need to follow through carefully with each required step of the Roth conversion to reap the benefits.

The Pros to a Mega Backdoor Roth

The mega backdoor Roth savings approach offers several benefits to employees who make the Roth IRA conversion:

  • No taxation on the earnings
  • May withdraw the contributions at any time
  • May withdraw the contributions and earnings tax-free for specific purposes (first-time home purchase, etc.)
  • Withdrawal of the contributions and earnings is tax-free after age 59-1/2 (with five-year waiting period)

In addition, required minimum distributions at age 72 are not required from Roth IRAs; participants can leave their accounts untouched until a later age.

The Cons to a Mega Backdoor Roth

The strategy is not without caveats. While the mega backdoor Roth IRAs boasts several benefits, there are drawbacks that employees must weigh before implementing a mega backdoor Roth:

  • Taxes must be paid on the accumulated earnings on the conversion at the time the conversion is made.
  • Employees may not realize a benefit from the mega backdoor Roth IRA if their tax rate decreases in the future.

There’s a five-year waiting period before tax-free withdrawals can be made, even if you are 59-1/2 or older.

Attempts to Repeal

Since the income limits on conversions sunset in 2010, numerous congressional proposals have attempted to restrict or eliminate the ability for high-income individuals to utilize backdoor Roth IRAs and associated strategies. This includes a proposal as recent as September 2021 by the House Ways and Means Committee. Any retirement plan or individual utilizing these strategies should closely monitor the evolving legislative and legal landscape around these programs.

Plan Design Considerations

Plan sponsors should also consider their current plan design and plan participation to determine if adding an after-tax feature would be wise. Since after-tax contributions are subject to nondiscrimination testing (under the ACP test), several scenarios would likely lead to test failures, requiring refunds, and ultimately prohibiting the HCE from executing the strategy.

  • If the plan does not provide a match, and mostly HCEs utilize the after-tax contributions, the ACP test would fail.
  • If you currently provide a safe harbor match, those contributions are exempt from ACP testing, so the after-tax contributions would be tested alone. If mostly HCEs choose to make after-tax contributions, the ACP test would fail.
  • If you currently provide employer matching contributions which would be averaged in with the after-tax contributions, the impact to the ACP test would be less severe. You should review how much the HCEs’ average contribution rates could increase before causing the test to fail.
  • If you have a safe harbor plan, adding the after-tax source will void the top-heavy exemption you might otherwise have had. If the plan is determined to be top heavy, the employer must satisfy the minimum contribution requirements (generally 3% of pay) with respect to all non-key employees.

Understanding these cautions, plan sponsors should consider adding the backdoor Roth features if the plan:

  • Is not a safe harbor plan;
  • Provides a matching contribution;
  • Passes ADP/ACP testing by a wide margin;
  • Has broad participation and good deferral rates among non-highly compensated employees; and
  • Automatically enrolls new participants, and regularly re-enrolls participants contributing less than the automatic deferral rate.


Through 401(k) and 403(b) plans, organizations of all kinds may offer opportunities for employees to implement a mega backdoor Roth IRA strategy. Reviewing your retirement savings plan and its provisions will allow you to answer inquiries from employees who are seeking additional ways to save and reduce taxes.

For more information regarding mega backdoor Roth IRAs, or to get a better understanding of how your company’s retirement savings plan may provide options for backdoor IRAs, contact Laura Guin, CPC at

Published October 21, 2021

© 2021 Findley, A Division of USI. All Rights Reserved

This information is provided solely for educational purposes and is not to be construed as investment, legal or tax advice. Prior to acting on this information, we recommend that you seek independent advice specific to your situation from a qualified investment/legal/tax professional.


Pension Changes from COVID Relief: Multi-Employer Plans

Estimated reading time: 4 minutes

The fifth round of COVID relief, the American Rescue Plan Act of 2021 (ARPA) was signed by President Biden on March 11, 2021. There are several changes in the details of the law that affect pension plan sponsors. This article focuses on changes to multi-employer plans. If you are a sponsor of or participate in a single employer plan, please check out our update on those changes here: Pension Changes from COVID Relief: Single Employer Plans.

Like the changes to the single employer system, the changes to the multi-employer system also contained modifications to reduce the amount of the annual required contribution, however, the primary purpose of the law was to provide governmental financial assistance to significantly underfunded plans.  

Reform concept. Stacked Wooden letters on the office desk.  Multi-Employer Plans Impact from the American Rescue Plan Act of 2021 (ARPA).

Special Financial Assistance

Troubled multi-employer plans will be eligible to receive funding from the PBGC necessary to keep the plan solvent until at least 2051, with no reduction in participant benefits. Eligible plans include:

  1. plans in critical and declining status for any plan year beginning in 2020 through 2022
  2. plans that have approved benefit suspensions
  3. plans in critical status with a modified funded percentage of less than 40%, and a ratio of active to inactive participants which is less than two to three
  4. plans that became insolvent after December 16, 2014, and have remained insolvent and not been terminated

Any plan receiving special financial assistance would be deemed to be in critical status until the last day of the plan year ending 2051. The funds received would be segregated from other plan assets and only invested in investment grade bonds or other investments permitted by the PBGC. Any benefit reductions from a previously approved benefit suspension would have to be reinstated prospectively for participants and beneficiaries and no future suspensions would be permitted. 

Multi-employer plans have until December 31, 2025, to apply to the PBGC for special funding assistance. Once submitted, the PBGC will have 120 days to reject the application. If the application is not rejected within 120 days, it is deemed to be approved.  If the original submission is rejected, funds would have until December 31, 2026 to submit a revised application.

One of the primary differences between the new law and the original Butch Lewis Act is that in the original bill the PBGC financial support was in the form of a loan that was to be paid back over 30 years. The new law does not contain this requirement.

The PBGC is required to provide regulatory guidance within 120 days of the enactment of the Law.

Delayed Status Recognition and Extended Recovery Periods

The new law allows plans to delay the recognition of any funding status changes (Endangered, Critical, or Critical and Declining) until the first plan year beginning on or after March 1, 2021 (or the next succeeding plan year) and permits plans with funding improvement or rehabilitation plans not to update their funding improvement or rehabilitation plans and schedules for this designated plan year. In addition, for plans in endangered or critical status for a plan year beginning in 2020 or 2021, the new law allows them to extend their rehabilitation period by five years. These changes allow funds additional time to recover from the economic impact of COVID both on the economy and the financial markets.

Extended Amortization Bases for 2020 Market Losses

Similar to legislation passed after market declines in 2008 and 2009, plans would be permitted to amortize the impact of investment losses for the first two plan years ending after February 29, 2020 over a 30 year period. This is an extension of the current requirement to amortize gains and losses over a 15 year period.

Increase in PBGC Premiums

The new law will increase the PBGC premiums paid by multi-employer plans from the current $31 per participant to $52 per participant but this doesn’t kick in until 2031. Future increases will be indexed for inflation.


The new law will provide a lifeline to many multi-employer funds that have been most impacted by the economic changes over the past 15 years. Without this much-needed relief, hundreds of thousands of retirees were facing significant reductions in their retirement benefits. Also, the additional time granted to allow Rehabilitation and Funding Improvement Plans and the ability to recognize 2020 investment losses over a longer period will lower the impact of the current economic conditions for many plans.

If you have any questions regarding how the ARPA might have impacts on your multi-employer pension plan, we encourage you to contact the Findley consultant you normally work with, or contact us in the form below to start the conversation on how this can impact your multi-employer plan.

Published March 11, 2021

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Pension Changes from COVID Relief: Single Employer Plans

Estimated reading time: 4 minutes

The fifth round of COVID relief, the American Rescue Plan Act of 2021 (ARPA) was signed by President Biden on March 11, 2021.  There are several changes in the details of the law that affect pension plan sponsors. This article focuses on changes to Single Employer plans. If you are a sponsor of or participate in a multi-employer plan, please check out our update on those changes here: Pension Changes from COVID Relief: Multi-Employer Plans.

While changes to the multi-employer system were designed to provide funding to significantly underfunded plans, the single-employer changes were designed to reduce the funding requirements for plans for the rest of the decade.

Extended Amortization Period

Since the Pension Protection Act (PPA) went into effect in 2008, the actuary calculates the change in the funded status of the plan every year.  A new base is set up each year to amortize unexpected changes in the funded status over seven years. As a result, most single employer plans currently have seven amortization bases. The new law wipes away all the old bases and resets all underfunding in one new base.  This base, and all future bases, will be amortized over 15 years instead of seven. This would be similar to refinancing a loan over a new longer period in order to reduce the required payment.

Extension of Interest Rate Stabilization

As interest rates continue to hover near historical lows, pension plan sponsors feel the pinch. Since pension liabilities are discounted using bond yields, low yields make for higher liabilities. The original Pension Protection Act (PPA) law was set to use a 24-month average of corporate bond rates. Later, an upper and lower boundary was created based on a 25-year average of corporate bond rates for the purpose of determining the minimum required contribution. The boundaries were set to start expanding in 2021 and effectively would have been fully phased out by 2024. Because current interest rates are lower than historical rates, this would lead to higher required contributions at a time when businesses can least afford them. Hence, the need for a law change.

Under the new law, the corridor’s range is being narrowed and won’t start widening until 2026. This will keep rates more level and mitigate the impact of the currently low interest rates for years. Finally, in an attempt to avoid having to re-visit these rules again if interest rates remain at historical lows, a 5% floor has also been added. Meaning, the interest rate used to determine the required contribution won’t drop below 5.0% regardless of market conditions. The chart below will help you understand how much the new law moves the needle.

Chart - Impacts of ARPA on Single Employer Plans - Interest Rates to be Used for Minimum Funding Purposes

Other Items

It is important to note that the extended amortization period can be retroactive to plan years beginning in 2019 and the extension of interest rate stabilization can be retroactive to plan years beginning in 2020. Even though many valuations have already been completed it may be advantageous to revise those reports in order to take advantage of the new law. 

There also is the ability to not have the new law apply until 2022. An election form will be needed for most single employer pension plan sponsors regardless as sponsors can specify not only when the new law applies but also for which purposes. There is also an extension of special funding rules that apply only to community-based newspapers.


It is important to note what is not included in the relief package: reductions to PBGC premiums. Contrary to the PBGC Multiemployer Trust which was projected to go bankrupt in 2026, the Single Employer Trust is overfunded and projected to increase overfunding each year moving forward. However, even with this projected overfunding neither of the changes outlined above alter the skyrocketed premium increases that occurred during the last decade.
It is important for plan sponsors to keep in mind that making lower contributions will likely increase their PBGC premiums and the management of those premiums will be a significant driver of funding decisions in the future. Even with lower contribution requirements, it may be prudent to make higher contributions in order to improve the plan’s funded status and lower PBGC premiums.

If you have any questions regarding how the ARPA might be impacting your single-employer pension plan, we encourage you to contact the Findley consultant you normally work with, or contact us in the form below to start the conversation on how this can impact your single employer plan.

Published March 11, 2021

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Defined Benefit Pension Plan Contributions: To 2021 and Beyond

While so many people across the country are looking forward to the end of this calamitous year – believing that 2021 will offer remedies for a global pandemic and an ailing economy, plan sponsors now should be plotting a strategy for the upcoming year and beyond. The Federal Reserve’s recent statement of “lower interest rates for longer” impacts defined benefit plan sponsors as they determine an approach to plan contributions – not just for 2021, but likely the next few years. Navigating a possible multi-year stretch of lower interest rates will be challenging for defined benefit pension plan sponsors, particularly for organizations feeling the effects of a pandemic-induced recession.

Forecast to Move Forward

This is an unusual recession, where the economic impact of the pandemic is varied. A number of industries are suffering, while others are seeing strong growth.  Certain manufacturers, supermarkets and online retailers, video conferencing firms and other companies enabling remote work have reported robust sales in recent months. The hospitality and entertainment industries, auto manufacturers and their suppliers, and numerous sectors of retail and manufacturing industries have been especially impacted through this pandemic.

Steering safely forward will require forecasting and guidance from the plan’s actuaries, and the first discussion with your actuary should focus on how the organization is currently faring. Organizations that have been hurt financially are likely to experience a “double whammy” as the company’s income drops and required contributions to their defined benefit pension plan increase.

Defined Benefit Pension Plan Contributions Forecast Chart

2020 Plan Contributions vs 2021 Cash Flow

Key to the contribution strategy conversation is determining how much the organization can afford to contribute. Some plan sponsors may choose to defer required 2020 plan contributions to January, 2021, while those companies having a good financial year may opt to contribute on the normal schedule, and may also contribute more than the required amount.

The decision to defer 2020 plan contributions, effectively at least doubling their contribution requirements in 2021, should be made only after weighing the pros and cons. Deferring may give the company time to come up with the funds needed, but the deferral may strain the organization’s cash flow with a large lump sum contribution coming due at the beginning of next year and other plan contributions required through 2021. Forecasting the organization’s financial picture is essential and it’s important to get answers to these questions in determining the contribution strategy:

  • When will the company’s cash flow improve?
  • How will our business be affected if another partial shutdown occurs and the economy continues to falter over the next nine months?
  • Should the organization finance its plan contributions now to either accelerate or avoid deferring future funding?
  • If plan contributions are deferred, can the lump sum contribution and other plan contributions be paid later from cash flow, through borrowing, or a combination?
  • Beyond the contribution impact, are there other impacts to the plan or the organization, such as PBGC premiums, by deferring or prepaying the plan contributions?

Look Beyond 2021

For most calendar year defined benefit plans, 2020 contributions will be lower than those required for the 2019 calendar year. Strong asset returns in 2019 resulted in that bit of good news, but plan sponsors should expect contributions to be higher for 2021 and beyond.

Economists are forecasting that the ripple effects of the pandemic on the economy will be widespread, taking several years to fully recover.  In light of an expected gradual recovery and the Fed’s message of ‘lower for longer’ interest rates, plan sponsors should anticipate having to manage their plans through a period of lower investment earnings and higher contributions, and understanding the reasonable range of contributions to expect is important.  Having a five- to ten-year contribution forecast that incorporates the economic outlook for the next several years will provide valuable insight on future contribution levels and help companies develop a longer-term funding strategy.

With low interest rates, plan sponsors have slowed down their annuity purchases from previous years, but some companies may consider offering a lump-sum window to their eligible participants to continue shrinking their obligations for their plans. These de-risking initiatives can create additional costs, so it’s important to understand the impact of these initiatives on future plan contributions before taking action. 

In addition, implementing a lump-sum window, not only needs to be fully explored with your actuarial team and legal counsel, the plan sponsor will also need to fully communicate the offer to participants to achieve the desired results. Support staff should be available to answer questions and assist participants with completing and submitting paperwork, if needed. During the pandemic, support should be virtual through call centers, microsites and other electronic meeting solutions.


As 2020 draws to a close, charting a course for DB plan contributions over the next few years is a wise decision that plan sponsors can make. Forecasting contribution levels, developing a contribution strategy, and implementing the plan are integral to moving forward as we experience “lower rates for longer”. Findley’s actuaries and consultants can offer guidance in developing defined benefit pension plan contribution strategies to navigate the return to normal.

Questions regarding what your plan’s contributions requirements for 2021 and beyond? Contact Tom Swain in the form below.

Published October 8, 2020

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DOL Issues Guidance on Lifetime Income Disclosure for Defined Contribution Plans

If you have a really good memory you might recall that way back at the end of last year Congress actually passed a significant retirement bill called the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”). We prepared a brief article about the impact the SECURE Act would have on defined contribution accounts that you can find here.

COVID-19 and the employee benefit issues it has created seems to have overshadowed the SECURE Act, but the folks at DOL apparently remembered that they had been given a task. Section 203 of the SECURE Act amended ERISA to require that individual account balance plans add lifetime income disclosure to at least one participant account statement a year and the DOL was given until December 20, 2020, to provide plan sponsors with guidance on how these disclosures should be provided. The DOL has now released this guidance in the form of an interim final rule (IFR) along with a helpful fact sheet.

DOL Issues Guidance on Lifetime Income Disclosure for Defined Contribution Plans

Let’s Assume

The lifetime income disclosure illustrations are meant to provide participants with some idea of what their account balance would provide as a stream of income at retirement. The IFR provides plan sponsors with a set of assumptions and rules that must be used to prepare illustrations and comply with the disclosure requirements. These include:

  • The calculation will use a point-in-time current value of the participant’s account balance and does not assume future earnings.
  • It is assumed the participant would commence the lifetime income stream on the last day of the benefit statement period after the participant has attained age 67 (Normal Social Security Retirement Age for most individuals). If the participant is already over age 67 his/her actual age should be used.
  • The lifetime income illustrations must be provided in the form of a single life annuity based on the participant’s age and as a 100% qualified joint and survivor annuity presuming that the joint annuitant that is the same age as the participant.
  • Monthly payment illustration calculations will project forward using the current 10-year constant maturity Treasury rate (10-year CMT) as of the first business day of the last month of the statement period.
  • Assumed mortality for purposes of the calculation must be based on the gender neutral mortality table in section 417(e)(3)(B) of the Code – the mortality table used to determine lump sum cash-outs for defined benefit plans.
  • Plans that offer in-plan distribution annuities have the option to use the terms of the plan’s insurance contracts in lieu of the IFR assumptions. For clarification purposes, it is important to note that nothing in the lifetime income disclosure rules require that plans offer annuities or lifetime income options.
  • Plans must use model language provided in the IFR to explain the life-time income illustrations to participants.

Sweet Relief

The concept of lifetime income disclosure has been under consideration by Congress and federal regulators for many years and one concern has always been what would happen if the actual results a participant experiences is not as good as these projections. The IFR addresses this concern by providing that if plan sponsors and other fiduciaries follow the IFR’s assumption and use the model language to comply with the lifetime income disclosure rules those fiduciaries will not be liable if monthly payments fall short of the projections.

Something to Keep in Mind

Plan sponsors and participants should keep in mind that the product obtained as a function of complying with these lifetime income disclosure rules is going to yield something quite different than the results that would be achieved through an interactive projection of a participant’s account.  Many retirement plan vendors and financial planners will utilize projection tools that take into account future contributions and earnings as well as attempting to anticipate potential market fluctuations and interest rate changes rather than simply basing a projection on a static period of time. While a participant may find the figures that would be generated by this lifetime income disclosure useful as a year over year comparative tool the participant should also explore other planning tools for a more complete and robust retirement projection.

Timing & Effective Date

This IFR was publicly released on August 18, 2020, and it is expected to be published in the Federal Register very soon. Interested parties have been given 60 days to comment on what the DOL has set forth. The idea is that the DOL will take the comments it receives and make any adjustments it feels are merited to the guidance and then issue final regulations that will supersede the IFR. The guidance in the IFR will be effective one year after publication in the Federal Register. If you have any questions regarding these topics and updates, please contact John Lucas in the form below.

Published September 3, 2020

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How To Successfully Navigate A DOL ESOP Investigation

“Dear Sir or Madam…our office has scheduled a review of the above captioned plan to determine compliance with the provisions of ERISA.” A formal notice from the Department of Labor (DOL) can bring a sense of unease to any employee stock ownership plan (ESOP) practitioner. However, by developing an understanding of why DOL ESOP investigations occur and familiarizing oneself with the DOL’s audit practices, navigating one will be less ominous.

What Is A DOL ESOP Investigation?

The DOL enforces the federal laws of retirement plans under the Employment Retirement Income Security Act of 1974 (ERISA). ERISA provisions grant the DOL authority to conduct investigations of ESOPs and, unlike those conducted by the Internal Revenue Service (IRS), it has the discretion to investigate and reinvestigate any plan it so chooses. Because ESOPs fall under the governance of ERISA, fiduciary duty is required to those who administer, manage, or control plan assets and any ESOP fiduciary is required to act solely in the best interests of the plan’s participants.

Beginning in 2005, the DOL’s ESOP review project initially focused on the valuation of privately-held employer securities purchased by the ESOP.  Even more so today, ESOP trustees are under continued scrutiny from the DOL regarding this subject matter. The trustee must continually demonstrate due diligence in analyzing the transaction and determine that the valuation procedures considered when authorizing the share purchase result in the trust’s payment of no more than fair market value (i.e. “adequate consideration”). Ultimately, the DOL monitors whether participants are being overcharged for the stock acquired by the plan. Failure of any ESOP trustee to uphold this duty may result in them being held liable for making the ESOP trust whole, as evidenced by an increase of monetary settlements in recent court rulings.

How To Successfully Navigate A DOL ESOP Investigation

Why Was Our ESOP Selected?

Because the DOL does not detail their selection process, understanding why your ESOP is under investigation remains unclear. They commence for various reasons, including through referrals from other government agencies or media sources, via plan participant complaints, through computer generated targeting (e.g. collecting information on Form 5500), or by random audit. Many of the investigations do not occur until after a fiduciary breach occurs and the severity of any infraction will determine any company/civil penalties or criminal proceedings. Additionally, DOL enforcement agencies typically provide little advance notice, so knowing how to respond before an investigation begins is critical.

What Can We Expect?

The formal investigation process begins after receipt of a notification letter from a DOL regional office. This letter requests an abundance of plan documentation, including:

  • Plan and trust document
  • ESOP board minutes and correspondence
  • ESOP allocation report
  • ESOP trust statements
  • Copies of Form 5500
  • ESOP loan documents
  • Payroll data
  • Service provider agreements

This information must be provided to the investigator within a certain deadline, although extensions may be granted. It is good practice for a company to establish a point of contact (i.e. ERISA legal counsel) to help aid in the information exchange process. This helps to avoid disruptions, maintains organization, and ensures all requested materials are reviewed and properly addressed. Once all requested documentation is received, the DOL conducts on-site visits comprised of in-person interviews, including key personnel, plan fiduciaries, and those involved with the day-to-day operations of the ESOP. During this stage, it is crucial that legal counsel represent those being interviewed since they can detail what to expect and inform those interviewed of their rights during the process.

What Happens Next?

At the end of the audit period, the DOL must decide whether to take any further action. This phase of the DOL ESOP investigation may take several months and, during that time period, the DOL may discontinue communication with the contact person. Ideally, an investigation ends with receipt of a “no action” letter, meaning the DOL has found no improprieties during its audit. To the extent that the DOL ESOP investigation uncovers violations of ERISA, they will issue a Voluntary Compliance Letter. The letter generally details the facts gathered by the DOL during the investigation, outlines the violations that they have uncovered, and invites discussions related to the remedy of such violations. The DOL may also insist on entering into a written settlement agreement, of which, civil penalties may be imposed. Should settlement not be amenable to both parties, the DOL may also provide the IRS with their findings, which may impose further penalties or excise taxes.

In summary, one should not underestimate the seriousness of a DOL ESOP investigation or the resulting outcome. In the interest of transparency, the department does provide online access to its enforcement manual, detailing their internal audit guidelines and checklists. With a thorough review of these documents and an understanding of the general steps of an ESOP DOL investigation, any plan sponsor can successfully navigate one.

Questions regarding the process of ESOP investigations? Contact the Findley consultant you normally work with or Aaron Geibel in the form below.

Published August 28, 2020

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Quarterly Contributions: To Delay or Not to Delay. PBGC Premium Savings Either Way

Looking for the silver lining in the clouds hanging over 2020? Through the CARES Act, defined benefit pension plan sponsors have a unique opportunity for significant savings in Pension Benefit Guaranty Corporation (PBGC) premiums. For plan sponsors who pay a PBGC variable premium based on their defined benefit pension plan’s unfunded liability, there are two options for premium savings – for those who have continued to make quarterly payments for the 2020 plan year, and for plan sponsors who expect to delay all 2020 contributions until December 31, 2020.

Quarterly Contributions: To Delay or Not to Delay. PBGC Premium Savings Either Way

Savings for Continuing Quarterly Contributions

Plan sponsors who have continued their 2020 plan year contributions will earn PBGC premium savings by reassigning the 2020 quarterly contributions to the 2019 plan year. Typically, this reassignment is not permitted unless there is an acceleration of the final 2019 contribution (due September 15, 2020 (calendar year)) to the first quarterly due date of 2020 (April 15, 2020 (calendar year)).

The CARES (Coronavirus Aid, Relief, and Economic Security) Act states that 2020 quarterly contribution funding deadlines for defined benefit pension plans have been extended to December 31, 2020. As a result, once the final 2019 plan year contribution is made, the 2020 quarterly contributions can be reassigned to the 2019 plan year. The savings to the variable rate premium is approximately 4.3 percent of the amount of contributions reassigned to the 2019 plan year.1

On September 21, 2020 the PBGC updated its guidance. Plan sponsors are no longer required to have contributions in the plan at the time of certification. While the usual filing due date of October 15, 2020 still applies (for calendar year plans), once contributions are made after that date, the plan sponsor can amend their filing and apply for a refund.

Updated to reflect PBGC Press Release Number: 

Savings through Delaying 2020 Contributions

A PBGC premium savings option also is available for plan sponsors who have planned to delay all 2020 contributions until December 31, 2020. Similar to above, the PBGC premium is still due October 15, 2020 (for calendar year plans). However, an amended filing can be prepared to receive a refund after the contributions are made by December 31, 2020.

The savings to the variable rate premium, in this case, would be about 4.3 percent of the amount of contributions reassigned to the 2019 plan year.

Choose a Strategy and Save

For example, assume that a plan sponsor has three required 2020 quarterly payments of $250,000. Implementing one of the strategies could bring nearly $32,000 in PBGC premium savings. There is some administrative work required to take advantage of these opportunities, but it’s not overwhelming and likely worth the effort.

The calculation to determine the amount of actual contributions and credit balance elections is complex and differs for each plan. To learn more about how your company’s defined benefit pension plan’s variable PBGC premium could be affected by either of these strategies, contact Larry Scherer in the form below.

Note: This article refers to dates for a calendar plan year, but the strategies also apply to non-calendar plan years.

1 Although the PBGC variable premium rate for 2020 is 4.5 percent of the unfunded pension plan’s liability, the premium saving is approximately 4.3 percent due to interest discounting of contributions.

Updated September 24, 2020

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Coronavirus Market Volatility and Pension Plan Contributions

The Coronavirus (COVID-19) pandemic’s impact on your family, friends and economy continues to unfold daily. Interest rates are down, and the equity markets are depressed and have been highly volatile. This economic situation will cause revenues of many plan sponsors to stagnate, which will drain cash reserves, and likely lead to layoffs. This is another “perfect storm” for the pension plan, which if the markets don’t normalize, will lead to much higher required pension contributions in the upcoming year. 

When revenues drop significantly, organizations will struggle to meet current and future funding obligations, as well as pay for essential plan operation services.

Seeking Federal Relief

Congress continues to work on additional funding relief and has recently released several changes impacting defined benefit plans.  However, additional relief measures may be contained in possible Phase 4 coronavirus legislation by early April. This relief will likely delay the impact of the current economic situation and allow plan sponsors to make lower contributions than they would have otherwise, but it likely will not permit sponsors to eliminate their long-term obligations. In other words, it will delay the impact of the current market conditions in hopes that the market will rebound after the coronavirus is under control. 

The Consequences for Late Contributions

If at all possible, plan sponsors will want to adhere to the required deadlines for contributions, both the quarterly requirements and any additional amount required by the final due date (8-1/2 months after the end of the plan year). This table shows the consequences for delayed quarterly contributions:

Contribution TimingPenalties
Less than 30 days lateInterest penalty at effective rate plus 5%
More than 30 days lateInterest penalty at effective rate plus 5%
Notification to PBGC**
More than 60 days lateInterest penalty at effective rate plus 5%
Notification to PBGC (due once contribution at least 30 days late)**
Notification to all plan participants

*Approximately 10% payable to the Trust as additional required contributions
**Generally, there is a waiver of the notification for late or missed quarterly contributions if the plan has less than 100 participants.  However, regardless of the size of the plan, the PBGC must be notified if a final minimum required contribution is missed.

Plan sponsors must meet the total required plan year contribution by the final due date, which is 8-1/2 months after the end of the plan year. There is no grace period for this contribution. Organizations that miss this deadline will experience:

  • Disclosure of an unpaid minimum on the U.S. Department of Labor’s Form 5500
  • Interest and penalties beginning immediately
  • An excise tax of 10% of the missed contribution, which is payable on the due date of the final contribution (for plans with a calendar plan year, the deadline for the final 2019 plan year contribution is September 15, 2020 and the deadline for the final 2020 plan year contributions is September 15, 2021), with interest accruing until paid. This tax is paid to the IRS and cannot be paid from plan assets.

Funding Waiver Requests

Organizations that experience temporary business hardship due to the Coronavirus’s (COVID-19) impact on the economy may consider applying to the Internal Revenue Service (IRS) for a funding waiver. However, under current law, it is generally cost prohibitive for smaller plans. The IRS user fee is approximately $30,000, which does not include the cost to prepare the request. Also, the waiver does not eliminate the required contribution, but merely allows you to amortize the payment over five years.

The application process for a funding waiver is onerous as organizations must provide extensive information about the company’s financial condition, the pension plan, as well as share details about executive compensation arrangements. In addition, notifications of the waiver request must be sent to plan participants, and the company must consider comments they receive from participants. The IRS also coordinates with the PBGC as it reviews funding waiver requests, seeking analysis and recommendations from the PBGC.

Maintaining Pension Plan Operations

For organizations whose cash flow is being dramatically impacted by the steps being implemented to fight the coronavirus, there are ways to continue essential services of the plan. Fees for most plan operations can be paid from plan assets. Essential services of the plan include:

  • Initiating new retirements or payments to beneficiaries
  • Paying lump sum benefits
  • PBGC insurance premiums
  • Plan audits
  • ERISA counsel services including plan documents and amendments
  • Government form filings
  • Actuarial counseling services
managing pension plan operations during coronavirus market volatility

It’s important to remember that this is a one-year deferral of the cash expense since fees paid from plan assets are generally added to the following year’s minimum required cash contribution. Consult with your ERISA counsel about paying any fees from plan assets as services that are essential to the employer, but not the plan, are generally not payable from plan assets.

Other Ways to Reduce Contributions?

For plan sponsors who deposited contributions in excess of minimum requirements in the past, a prefunding balance or a carryover balance may be available to be used to offset all, or a portion of, a future contribution requirement. A formal election to create or add to the prefunding balance must be made, and there still may be time to do this related to last year’s contribution.  

Plan sponsors with cash flow concerns may consider options of freezing benefits or reducing benefits in order to reduce future contributions. If participants are currently earning new benefits (i.e., your plan is not currently frozen) an organization may be able to amend the plan to eliminate (i.e. freeze) or reduce benefits before they are earned in 2020.

This may not eliminate the required contribution for 2020, but it will reduce it by the value of the benefits that were expected to be earned. However, in order to freeze or reduce the current year’s benefit, the organization must amend the plan before any participant completes the required number of hours during the plan year (typically 1,000 hours, but varies by plan design). 

Freezing or reducing plan benefits requires a plan amendment and a participant notification. Plans with at least 100 participants require at least a 45-day notice before benefits can be reduced or eliminated. Plans with less than 100 participants only require at least a 15-day notice period. For plan sponsors who are considering reducing 2020 plan year benefits, time is of the essence to amend your plan and distribute the proper notification within the timing guidelines.

Eliminating or reducing plan benefits is a tough decision. There are issues other than cash contributions to consider before making a move, including possible financial statement impact (i.e., ASC715 curtailment expense, if applicable) and human resource/employee relations implications.

Questions regarding contribution options for your defined benefit pension plan, contact the Findley consultant you normally work with, or Keith Nichols at or 724.933.0631 or Wesley Wickenheiser at or 502.253.4625

Published March 26, 2020

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Taking Public Sector Retiree Medical To The Next Level

Faced with the sobering reality of more than $1 trillion in unfunded retiree healthcare liabilities, public sector employers across the country are seeking a sustainable retiree health benefit solution. Their shift to relying on retiree health insurance exchanges will not be without challenges or concerns. One solution that is just starting to be used is to work with state legislatures and make benefit changes that allow public sector employees to convert unused sick leave into retiree health insurance credits.

Numerous plan sponsors for public sector organizations may already be using – or contemplating the use of — retiree healthcare insurance exchanges to facilitate purchase of pre-65 individual policies or Medicare supplemental benefits. As public sector employers review this option, they should consider issues that may arise if future cuts are made to retiree medical stipends. What will be the exchange-based solution?

Earlier this year, the Ohio Public Employees Retirement System (OPERS) announced that serious financial pressure will result in significant reductions in stipends for retiree health benefits. The cuts for pre-65 retirees may be as much as $400 per month and will affect retirees including police and fire department pensioners. Although the mandatory retirement age for a public safety officer may be 65, many police officers and firefighters retire well ahead of Medicare entitlement, because of health status and long service.

According to a January 16, 2020 article, the changes will reduce OPERS unfunded healthcare liabilities from $6.2 billion to $27 million. Officials from OPERS said the $11 billion healthcare fund was set to run out of money in 11 years, but with the changes that will be implemented beginning in 2022, the fund will be solvent for 18 years.

In addition to cutting premium subsidies for retirees in 2022, healthcare coverage will no longer be provided through OPERS. Retirees will receive an OPERS subsidy to be used toward the purchase of healthcare coverage through the healthcare marketplace.

public sector employers across the country are seeking a sustainable retiree health benefit solution

Look beyond HSAs

It is evident that there is an acute need for public sector employers to accumulate funds for retiree medical benefits while the plan participant is actively employed. While Health Savings Accounts (HSAs) provide an opportunity for employees to create a nest egg, implementing a qualified high deductible health plan for collectively bargained public sector groups remains a challenge. In addition, these high deductible plans are not immune to problematic healthcare trends, including how high cost specialty drugs can ravage an employer’s (and employee’s) health benefits budget.

An alternative to an HSA, Health Reimbursement Accounts (HRAs) do not need to be paired with a high deductible plan, but the employer contributions are typically modest and easily consumed by out-of-pocket medical, prescription drug, dental and vision expenses. For instance, according to Mercer’s 2018 National Survey of Employer Sponsored Health Plans, the median HRA annual contribution for those with single coverage was just $625.

A better mechanism is needed to establish funds for public sector retiree medical benefits – and the states of New York and Wisconsin may be on the right track. New York’s policy allows eligible state employees to cover some retiree health insurance costs with unused sick leave, while in Wisconsin, the Accumulated Sick Leave Credit Conversion Program allows state employees covered by the State Group Health Insurance Program to convert unused sick leave into credits to pay for health insurance when they retire. The credits cannot earn interest or be used to pay for insurance that is not part of the State Group Health Insurance Program.

Since most employers, public sector and private, are interested in reducing health care liabilities and not subsidizing retirees under their active employee health benefits plan, the Wisconsin approach – with some important tweaks — is an intriguing solution that should be considered in other states.

Retiree medical’s future: Sick leave conversion, HRAs and marketplace options?

First, the decision to convert unused sick leave into health insurance credits should be left to each retiring employee without triggering a taxable event. In 2005, the Internal Revenue Service (IRS) issued Revenue Ruling 2005-24 that allowed employers to use sick leave and vacation conversion programs to fund an HRA, as long as the employees did not have the option to take these converted amounts in cash. Then, in 2007, the IRS issued a Private Letter Ruling (PLR 200708006) indicating the sick leave and vacation conversion arrangement did not result in taxable income if the employer mandates what unused amounts would be converted to cash, contributed to the HRA, or used to pay other benefits.

In other words, the employee has no say in any of these important decisions.

Second, the retiree should not be forced into remaining in their former employer’s group health plan. They should have the ability to shop the insurance marketplace for a plan and medical provider network that meets their needs.

Third, the retiree should be able to decide how to spend the HRA funds. Even the new Excepted Benefit HRA unveiled last year by the Trump administration (where up to $1,800/year may be contributed by the employer) does not allow the HRA to be used to pay premiums for Medicare Parts B or D; individual health insurance (except for short-term limited duration insurance); group insurance coverage (except COBRA); or Medicare supplements or Advantage plans.

Although a traditional HRA or Retirement HRA may allow payment of premiums for Medicare or long-term care insurance; and if using a trust, accept employee/retiree after-tax contributions and accrue interest tax-free, there is still the issue that conversions of unused sick leave must be made on a mandatory basis by the employer. The employee cannot make such an election before retirement.

As state legislatures consider strategies to deal with the ever growing costs of providing retiree healthcare, the option of new legislation that would permit state and local governments to create sick leave conversion programs that would enable their retirees to use those funds to help pay for health insurance purchases on or off an insurance exchange. To give employees more control over the conversion to credits, there would have to be some changes to the employer’s  IRC 125 cafeteria plan.  The approach could provide a more sustainable bridge to Medicare for those public sector employees who retire before age 65.

We are interested in your thoughts about this topic. Please contact Bruce Davis with your comments and questions at or 419.327.4133

Published March 24, 2020

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