The Department of Labor (DOL) issued guidance and best practices on January 12, 2021 to pension plans in hopes that Plan Sponsors can locate missing participants. The guidance provides various communication strategies and ways to search for missing participants. The end goal is to have zero missing plan participants, which may be difficult to accomplish, but hopefully they can be minimized.
Uncashed 401(k) distributions are a focus area for the Department of Labor as they view this as a fiduciary responsibility of the Plan. When a Plan changes record keepers, this could be an issue that gets overlooked. Many workers will have different jobs over their lifetime, unlike previous generations, which may make it difficult to keep participant data current.
The process of maintaining current participant data includes:
- Maintain multiple points of contacts (e.g. phone, email, address)
- Update beneficiary information regularly
- Identify missing and unresponsive participants
- Establish a method for tracking missing participants
For those who use third party administrators (TPA’s) to maintain plan records and handle communications, Plan Sponsors should ensure the TPA’s are performing the agreed upon services and identify and correct any issues discovered.
Credit for Small Employer Pension Plan Startup Costs
Eligible small employers (those with 100 or fewer employees) may be able to claim a tax credit of up to $5,000, for three years, for the ordinary and necessary costs of starting a SEP, SIMPLE IRA or qualified plan (like a 401(k) plan.)
You may claim the credit for costs to set up and administer the plan and educate your employees about the plan. A tax credit reduces the amount of taxes you may owe on a dollar-for-dollar basis unlike a tax deduction which reduces your tax liability.
If you have any questions regarding setting up a retirement plan, please contact us for assistance.