Late last year, the Department of Labor’s (DOL) Lost and Found Database came into existence as required by SECURE 2.0. There were quite a few bumps in the road in getting the database up and running. From determining what information should be provided, to how the submission would occur, and whether submission would be voluntary. It was a rough ride getting to the start and will likely continue in the future.

However, there is a way to avoid sending any information to the Lost and Found Database – whether submission is voluntary or required. Use force-out distributions and automatic rollover IRAs to remove participants for whom information would need to be submitted.

Database Requirements… For Now

As of the release of this blog, the DOL is asking for retirement plans to voluntarily provide the name and Social Security number for any participant who:

• separated from service,
• is owed a benefit from the plan, and
• is age 65 or older.

The DOL also asks for the plan administrator’s contact information so that individuals included in the database may inquire about receiving their plan benefits. The DOL asked for this information to be submitted before December 29, 2024, and updated annually thereafter.

The DOL created a spreadsheet template to collect the requested information which can be uploaded directly to the Database. Although not ideal, the spreadsheet template is a better option than the DOL’s initial idea of using their EFAST system. Many warned of potential confidentiality and privacy issues in using EFAST as most information collected through that system is openly available to the public.

Potential Database Issues

As the submissions are requested on a voluntary basis (for now), the DOL provided some incentives to ensure plans would provide information for the Lost and Found Database. For example, the DOL clarifies that a plan fiduciary is satisfying their duty to properly mitigate against cybersecurity risks when voluntarily submitting information to the Database.
Unfortunately, there is still much unknown and undecided about the risks of submitting information to the Lost and Found Database. For example, it is unclear how state privacy laws are affected. The DOL stated that it will not bring an enforcement action if submitting information violates a state law. However, the bigger issue is whether any individual states may bring potential legal action against plans for alleged privacy violations.

Avoid Potential Database Issues With Force-Outs Distributions At Normal Retirement Age

There is a way to avoid these potential risks in submitting information to the Lost and Found Database. Don’t submit any information. To clarify, I am not advocating that plans take advantage of submissions currently being voluntary and just not provide any information. The recommendation below allows you to avoid submitting information to the Database whether it is voluntary or required.

The recommendation is to remove participants who have terminated employment if they don’t take their account balance by the plan’s defined normal retirement age (NRA) . As a quick recap, the DOL asks for information for participants who (i) have separated from service, (ii) are owed a plan benefit, and (iii) are age 65 or older. Those three criteria are identical to the ability to process a force-out distribution without participant consent.

No information needs to be submitted to the Lost and Found Database if you require any participant satisfying these three criteria to take a distribution (including by force-out distribution). In other words, your plan would not have any participants that meet the criteria for being included in the Lost and Found Database.

If you are considering this strategy, please note that a plan amendment may be needed. Many plan documents default to requiring participant consent before making distributions for balances above $7,000 – at least until required minimum distributions begin. The good news is that the amendment can be effective for all current and former employees. To illustrate, after you complete the amendment process, you can initiate a clean-up project to remove any old balances for employees who left long ago, have not taken a distribution, and are now over age 65.

Force-Out Distributions Prevent Sending Information For The Database

The DOL Lost and Found Database will likely continue to be a bumpy ride. If you or your clients are having reservations about submitting information, there is an alternative regardless of whether submission is voluntary or required. Using force-out distributions at NRA alleviates any need to submit information because the plan would have no participants meeting the criteria to be included in the Database.

Oh, and the idea of having a database to help participants find lost retirement plan balances may sound familiar. PenChecks established a database to do just that in 2005. The National Registry of Unclaimed Retirement Benefits (NRURB) is a free public service designed to help individuals claim their missing retirement money. Entry into the NRURB is included with many of the services offered by PenChecks.

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.