The ERISA Industry Committee (ERIC) submitted comments in response to the Pension Benefit Guaranty Corporation’s (PBGC) proposed rule regarding missing participants under the Employee Retirement Income Security Act (ERISA) Section 4050.
ERIC notes that the legislative authority to create the PBGC’s missing participants program was limited to terminated defined contribution (DC) plans, but, it says, it would be beneficial to work toward extending the program to all DC plans. “A system of multiple missing participant programs at multiple agencies would be inefficient and lead to confusion for plan sponsors and participants. If the PBGC missing participant program for terminated defined contribution plans is successful, it would be more efficient to extend it to all defined contribution plans, rather than wait for another federal agency to create a separate missing participant program for all other retirement plans,” Will Hansen, vice president of Retirement Policy at ERIC, wrote in the comment letter.
ERIC also suggests that the PBGC lower the fee waiver threshold from a $250 or less account balance to a $1,000 or less account balance. Hansen notes that if an account balance is $251, the $35 fee represents 14% of the account balance. The letter argues this is cost-prohibitive for plan sponsors.
If the PBGC doesn’t lower the fee waiver threshold, ERIC suggests a tiered fee structure—for example, $15 for account balances between $251 and $500; $25 for account balances between $501 and $1,000, and $35 for account balances greater than $1,000.
In addition, ERIC encourages the PBGC to always maintain the voluntary nature of the program. “Mandates on plan sponsors does not yield additional retirement savings or overall support for the employer-based system,” Hansen wrote.
Finally, ERIC encouraged the PBGC to incorporate a system that will allow the agency to electronically roll over a claimed account balance from the participant to a qualified retirement plan of the participant. “An electronic rollover instead of a paper check may provide a greater likelihood that the funds distributed will be maintained for the purpose of retirement,” Hansen wrote.
ERIC’s comment letter may be viewed here.