PLANSPONSOR - November/December 2017 - 20

Upfront
Reaching the Retired and Terminated
terminated vested employees, notably
their address and how to get in touch with
them. His firm encourages employers
to confirm at the time of separation that
the person's employment and any plan
records are up to date. If a participant is
moving, find out the new address, he says.
Jack J.M. Towarnicky, J.D., LL.M.,
executive director of the Plan Sponsor
Council of America (PSCA), stresses the
need to recognize the exclusivity of each
of an employer's term vested benefit plans.
" I think it is very important to note
that each benefit plan is a separate legal
entity from the employer, " he says. Likewise,
participants' relationship with their
benefit plans is separate from the one they
have with the employer-a point, he says,
they need to know. " So, while an employer
may not have much reason to keep in touch
with former employees, the plan sponsor
has mandated disclosures and other
potential reasons to reach out to workers
who have separated. " These may include
sending information on COBRA [Consolidated
Omnibus Budget Reconciliation Act]
health care coverage, life insurance conversion,
or actions that may be taken with
accrued benefits in excess of $5,000.
" Because the 403(b) and 401(k) are
WHAT communication obligations do
plan sponsors owe to participants who
have made the decision to leave funds in
their retirement account after exiting their
company? According to Jeffrey Capwell, a
partner at McGuire Woods and leader of
the firm's employee benefits and executive
compensation group in the Charlotte,
North Carolina, area, " There is very little
difference, if any, with the fiduciary obligations
owed to a 'term' [i.e., terminated]
vested-as opposed to an active-participant
in the plan.
" If people have funds in a plan then
under ERISA [Employee Retirement
Income Security Act], they are treated
as participants, " he continues, defining
a participant as anyone with a benefit
payable in the plan. A participant who has
left the company has all the same rights as
other participants, he says. " [That means]
he has to get the same notices with respect
to plan fees and investments; he has to get
quarterly statements, a QDIA [qualified
default investment alternative] notice if
there is a QDIA under the plan. So, in most
respects, there is no real difference in obligation
for a terminated vested participant. "
He also stresses that plan sponsors
should maintain good records on
20 PLANSPONSOR.com November-December 2017 Art by Katherine Streeter
intended to be retirement savings plans
by definition, the intended beneficiary
of the account will always be a former
employee, " Towarnicky notes.
If a defined contribution (DC) participant
is leaving his job, he has several
options for his account balance. Usually
one of these is to leave the money in
the employer plan; there may be advantages-particularly
if he likes the plan's
investments, if it has low fees and if he
has the alternative to move the balance to
a new employer's plan later.
For the employer, once a benefit is
distributed from the plan in its totality,
virtually all fiduciary obligations end,
Capwell observes. " The only exception
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