The NTIS, a federal agency under the Department of Commerce, recently released a request for information (RFI) about the establishment of a certification program by the agency to ensure DMF information is requested by appropriate parties for valid reasons during the three-calendar-year period following a person’s death. Investigating the establishment of such a certification program was prompted by the passing of the Bipartisan Budget Act of 2013, which prohibits the disclosure of DMF information during the three-calendar-year period following death unless the requesting party is certified under a program established by the Department of Commerce.
The law, specifically Section 203, discusses some of the valid reasons for requesting DMF information such as: having a legitimate interest in fraud prevention; or a business purpose that is pursuant to a law, regulation or fiduciary duty. The law also asks that those requesting the information have safeguards in place to protect it.
In response to the RFI, a group consisting of The SPARK Institute, Plan Sponsor Council of America, the ERISA Industry Committee, American Society of Pension Professionals and Actuaries, and the American Benefits Council, as well as several other stakeholder organizations, explain, “It is essential that any guidance reflect Congress’ clear desire to permit continued access for legitimate users of the DMF, including retirement plans and service providers acting on their behalf during the development of the certification program as well as during the application process.”
The letter adds, “Simple and inexpensive access to the DMF information is critical to the efficient functioning of all types of retirement plans, including pension plans and defined contribution plans (such as 401(k) plans). When plan benefits are paid in the form of life or joint life annuities, incorrect payments can be made to the deceased participant (sometimes through direct deposit) rather than the beneficiary without access to information from the DMF. Other plans need DMF information for other purposes, such as determining when a plan beneficiary becomes eligible for benefits (and takes over investment direction in a participant-directed plan).”
The authors of the letter remind the NTIS that retirement plan fiduciaries are subject to the fiduciary requirements found in the Employee Retirement Income Security Act (ERISA). These fiduciary duties include paying benefits to the appropriate party under the terms of the plan, with that party changing upon the death of the participant. Access to DMF information helps to carry out such duties. It is also important that plan sponsors and service providers be able to share DMF information with each other in order to execute their respective duties to the plan, according to the letter.
The RFI asked for comments about several questions for the certification, including but not limited to:
- Do you think you have a legitimate fraud prevention interest in accessing DMF information?
- Do you have the systems, facilities and procedures in place to safeguard DMF and experience in maintaining the confidentiality, security and appropriate use of such information?
- Would the imposition of a single, presumably larger, fee at the time of certification be preferable to the charge of multiple, presumably smaller, fees such as annual ones?