In November of 2015, Congress enacted the “Federal Civil Monetary Penalties Inflation Adjustments Act” to (what else?) apply inflation adjustments to various penalties. One of those penalties was the $10 per employee penalty for failure to furnish reports to certain former participants and beneficiaries or maintain records.
The new penalty, as published in the Federal Register, is now $28 per employee, effective August 1, 2016.
With the growth of auto enrollment in the 10 years since the passage of the Pension Protection Act, combined with the increase in workforce mobility over that time (the “gig” economy), employers are struggling to maintain current addresses for former participants.
In October of 2013, the ERISA Advisory Council held a session to establish best practices for finding missing participants – a summary of the findings can be found here, and is an excellent resource for best practices and legal guidance. As a recognized thought leader in the area of lost participant search, Retirement Clearinghouse was asked to submit testimony.
Another emerging best practice is for employers to encourage participants to consolidate prior employer plan balances into their active plan upon hire. Some plans offer a facilitated roll in service to take on the complex task of DIY roll ins for their new hires. For small balance accounts (less than $5,000), the Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings is recommending the creation of a “Retirement Security Clearinghouse” to ease the process of consolidating retirement accounts.
Given the penalties sponsors face for not properly tracking separated participants, and the obvious benefits of consolidation from plugged cash-out leakage and lower participant record-keeping fees, facilitating consolidation through seamless portability will be the next “auto” feature plans will leverage as they continue to improve their plans, and their participants retirement outcomes.
Neal Ringquist is executive vice president of sales and marketing for Retirement Clearinghouse. Retirement Clearinghouse provides services that enable unbiased collaboration between retirement plan sponsors, participants, record-keepers, service providers and regulators to facilitate portability and promote consolidation, which create better outcomes for all stakeholders.
