Sometimes the timing or content of agency guidance is head-scratching. The Department of Labor’s (DOL) Field Assistance Bulletin (FAB) 2025-01 fits in this both categories. The timing is odd as it references reports from 2019 and 2014 to support its current day relevance. The content is confusing as it appears to over-complicate a process which already has a simple solution.

The bulletin allows temporary relief of DOL enforcement for fiduciaries who transfer retirement plan benefits of $1,000 or less owed to missing participants to a state unclaimed property fund. This relief is only provided if the plan fiduciaries comply with applicable conditions.

But satisfying the applicable conditions can be overly-complex, as detailed below. Moreover, a much simpler process already exists – balances of $1,000 or less should be transferred to an automatic rollover IRA.

That’s A Lot of Conditions

At first glance, the conditions seem straight forward and similar to conditions of using an automatic rollover IRA. To obtain enforcement relief under FAB 2025-01, a plan fiduciary must comply with five conditions:

1. Determine that the transfer to a state unclaimed property fund is a prudent destination for the participant’s benefits;
2. Implement a prudent program to find missing participants consistent with the DOL’s Best Practices for Pension Plans, and nevertheless be unable to locate the participant or beneficiary;
3. Select the state unclaimed property fund offered by the state of the last known address of the participant;
4. Explain in the plan’s summary plan description that missing participants’ benefits may be transferred to an eligible state fund and identify the name, address, and phone number of a plan contact for further information concerning the eligible state funds to which the benefits are transferred; and
5. Verify that the state unclaimed property fund qualifies as an “eligible state fund.”

It’s the fifth condition that really overcomplicates this process. To verify if the fund qualifies as an “eligible state fund,” the following NINE conditions must be met by the state unclaimed property fund:

1. Acts as the custodian of the funds for the benefit of the affected participants, beneficiaries, and their heirs and allows for claims to be made and paid in perpetuity regardless of when unclaimed property was received by the state;
2. Does not reduce the transfer amount by any fees or other charges (i.e., pays the approved claimant not less than 100% of the amount reported and remitted by the fiduciary);
3. Maintains or causes to be maintained a searchable website that reliably shows, at no charge, the name of the missing participant or beneficiary and the name of the plan in the results page of a search and permits an electronic claim process;
4. Provides the public with the ability to make inquiries concerning unclaimed property by physical mail, electronic mail and telephone;
5. Participates in the National Association of Unclaimed Property Administrators MissingMoney.com website or similar non-commercial unclaimed property database operated under the auspices of the National Association of State Treasurers, Inc.;
6. Provides streamlined processing for small claims (e.g., claims of $1,000 or less);
7. Diligently searches at least annually for an updated address for missing participants and beneficiaries for amounts in excess of $50, and, upon obtaining an updated address, notifies the owner in writing that the state fund is holding the owner’s money;
8. Permits a plan whose fiduciary has transferred the unclaimed property to the state to pay a reappearing participant or other payee directly, and then obtain reimbursement from the state; and
9. Participates in the States’ Unclaimed Property Clearing House, as operated by the National Association of State Treasurers, Inc.

Is it worth a plan fiduciary’s time to verify these conditions for each state in which unclaimed property fund may be utilized when a simpler solution – automatic rollover IRAs – exists today?

Utilizing An Automatic Rollover IRA

Using automatic rollover IRAs for balances of $1,000 or less helps plan fiduciaries avoid uncashed checks and locate missing participants. In addition, this process prevents unwanted taxable income and penalties for participants.

In FAB 2025-01, the DOL states that a 2019 report by the ERISA Advisory Council recommended that the DOL issue guidance on voluntary transfers of retirement benefits to state unclaimed property funds. The 2019 report cited a 2014 report on force-out distributions rolled over to IRAs finding that, with respect to the IRAs analyzed, fees often outpaced returns and account balances decreased over time.

At PenChecks, we believe our mission is to help not only service providers and plan sponsors, but also participants. That is why we invest our automatic rollover IRAs in stable value funds earning approximately five times the average money market account rate. Using automatic rollover IRAs through PenChecks allows for investment returns that exceed fees for a net gain to the participant. This is allows for the benefit growth for the participants – growth that is not possible in using state unclaimed property funds.

The inability for the benefit to grow in state unclaimed property funds may raise the question of whether using such funds is prudent in comparison to the alternatives currently available. This may be why the DOL made this only a temporary enforcement policy expiring on September 30, 2026.

Keep It Simple

Using automatic rollover IRAs for benefits of $1,000 or less helps plan fiduciaries comply with their obligations of handling plan assets and locating missing participants. You could transfer those amounts to the applicable state unclaimed property fund(s), but then you would have the additional work of satisfying 14 conditions across various states.

It should also be noted that FAB 2025-01 only provides relief from DOL enforcement actions. It does not provide any protection against claims of fiduciary breach which may be brought by participants. Just because you can transfer small balances to state funds, doesn’t mean you should. Instead of unclaimed property funds, use automatic rollover IRAs for these benefits to make your life easier.

About the Author

Brian Furgala, Esq., CPC, QPA is Senior Director, Retirement Services Strategy for PenChecks, a leader in outsourced retirement plan distribution processing and Automatic Rollover/Missing Participant IRAs and related services. His broad experience as an ERISA attorney and senior executive for several leading retirement plan service providers gives him a unique perspective on the industry.

The views expressed in this article are those of the author and do not necessarily represent the views of PenChecks Trust®, its subsidiaries or affiliates.