DOL Investigating DB Plan Payment Practices

Your DB plan sponsor clients should start reviewing their payment practices now, attorneys tell PLANADVISER.


The U.S. Department of Labor (DOL) is rolling out an initiative focused on the investigation of benefit payment practices of the defined benefit (DB) plans of a number of Fortune 500 companies, according to a client alert from Morgan Lewis & Bockius LLP.

The investigations are concentrated on plan procedures in three key areas: (i) locating missing participants, (ii) informing deferred vested participants that a retirement benefit is payable, and (iii) commencing benefit payments when the participant reaches age 70½.

The DOL hasn’t made a formal announcement of the initiative, but Robert L. Abramowitz, with Morgan, Lewis in Philadelphia, tells PLANADVISER some DOL employees have mentioned it when speaking at events, with one speaker saying the efforts started in Philadelphia and will be expanding. ”I wouldn’t be surprised if at some point the DOL makes this formally known,” adds Matthew H. Hawes, with Morgan, Lewis in Pittsburgh.

As to how the DOL is advancing its initiative, Abramowitz says several clients have been subpoenaed for information and one client received an audit notice. He adds that the DOL is not picking DB plan sponsors at random; a DOL spokesperson said the agency is tracking Form 5500s and looking for DB plans with large numbers of deferred vested participants, which, Abramowitz says, tends to be bigger, older companies.

NEXT: Suggestions for DB plan sponsors

Hawes says not every DB plan has a problem—some do participant searches regularly—but it’s not a bad idea for DB plan sponsors to make sure they are following procedures and complying with the law regarding making payments.

“What we tried to communicate in the client alert is plan sponsors should get in front of the issue,” Abramowitz says. “If they don’t find out there’s a problem until the DOL comes, they won’t have sufficient time to address it.”

Hawes points out that the Internal Revenue Service (IRS) letter forwarding program is no longer available, but the IRS suggested plans should use formal locator services—companies that will help locate participants and demographic data through public records—or use the Internet.

Abramowitz adds that he’s seen businesses cleaning up data for a lump-sum initiative have success by asking individuals’ former colleagues for demographic or address information.

If a plan sponsor gets a subpoena or audit notice, Abramowitz suggests it should start collecting data. If data is not readily available, start a conversation with the DOL investigator about whether requested information can be narrowed based on a particular or whether an extension can be granted to gather data.

While Abramowitz doesn’t think it is necessary for plan sponsors to go through an attorney to interface with the DOL, Hawes says many clients feel more comfortable with that.