Jim Haubrock, a member of the Executive Committee of the American Institute of CPAs’ (AICPA) Employee Benefit Plan Audit Quality Center (EBPAQC), testified on Aug. 28, 2013 before the ERISA Advisory Council at a hearing focused on connecting missing and lost participants of employee benefit plans with their benefits.
The benefits unclaimed by missing and lost participants present plan representatives and auditors with accounting and auditing issues, including how to account for unclaimed benefits and stale, uncashed benefit checks.
“While historically the total dollar amount of unclaimed benefits and uncashed checks in employee benefit plans generally has not been significant, recent trends are contributing to an increase in unclaimed benefits and uncashed checks to participants and beneficiaries,” Haubrock testified.
He said these trends include plans providing for automatic enrollment in 401(k) plans, employees holding multiple jobs during their careers and leaving their retirement accounts with their ex-employer when they change jobs, and employers’ automatic distributions of former employee account balances of less than $1,000. As a result of these trends, the amount of unclaimed benefits and uncashed checks has become quite large in some plans, and there is an increasing likelihood that the amounts will continue to increase in even more plans. Many plan sponsors may not even be aware that participants or beneficiaries have not cashed their benefit checks. Uncashed checks may go undetected indefinitely or until there is a significant plan change, such as a change in service provider or plan termination.
THE EBPAQC made several recommendations to the Advisory Council, including 1) that the U.S. Department of Labor (DOL) should issue guidance clarifying whether uncashed checks are considered plan assets under ERISA, 2) that the DOL should issue guidance clarifying how unclaimed benefits and uncashed checks should be reported in the Form 5500 and 3) that the DOL should clarify the plan sponsor’s (fiduciary) responsibility for following up on unclaimed benefits and uncashed benefit checks.