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DOL Focuses on Uncashed Retirement Checks

The US Department of Labor’s (DOL) focus on uncashed checks and missing participants has expanded to include uncashed retirement checks held by former record-keepers. The DOL is now urging retirement plan fiduciaries to reclaim funds retained by previous record-keepers or payment agents that may have been neglected during the transition of the service provider to a new vendor.

The DOL has started a letter-based initiative, sending letters, which appear to be an extension of the Department of Labor’s recent wave of ERISA-related investigations, to inform retirement plan fiduciaries of the existence of small uncashed check balances, directing them to work with former record-keepers to restore the amount to individuals who failed to cash distributions.

DOL Rules for Uncashed Retirement Checks

The letters reference the basic ERISA requirement that plan fiduciaries must ensure that all participants and beneficiaries get funds to which they are entitled. The letters ask plan fiduciaries to provide copies of documentation to:

  • confirm that uncashed check amounts, including lost earnings, have been returned, and
  • demonstrate that the allocation of funds are deposited into the accounts of affected participants/beneficiaries.

Fiduciaries may find that the difficulty of discovering the member or beneficiary who is entitled to the uncashed amount exceeds the value of the benefit. However, the DOL expects fiduciaries to return all amounts to a plan’s trust.

The Department of Labor’s latest letter campaign appears to be the agency’s first focus on minor benefit amounts that may have stayed with a vendor after a switch to a new service provider. Although the DOL’s recent Terminated Vested Participant Program (TVPP) audits were primarily focused on missing participants, certain TVPP audits also focus on uncashed retirement checks with existing record-keepers. Regardless, DOL has provided little guidance on a fiduciary’s duty concerning uncashed checks.

In the latest sub-regulatory guidance, the DOL has stated that the lack of policies and procedures regarding uncashed retirement checks is a red flag of a missing participant problem. Fiduciaries should flag “undeliverable mail/email and uncashed checks for follow up” as part of the best practices for a missing participant.

Plan Fiduciaries Considerations

Considering the latest developments, plan fiduciaries should evaluate recordkeeping and service provider agreements. Additionally, they must evaluate uncashed check procedures to ensure existing processes and practices for managing uncashed checks.

Furthermore, plan fiduciaries may consider proactively contacting former record-keepers, trustees, or paying agents—particularly if any of these connections have recently changed—to see if undelivered assets remain after the changeover.

Ensure Best Practices & Compliance with Windes

As the DOL urges retirement plan fiduciaries to work with prior record-keepers to recover uncashed checks, Windes can help you ensure best practices. We offer employee benefit plan audits and other employee benefits services. Contact Windes if you have received a DOL letter or wish to learn more about DOL audits in general.
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