Should a fiduciary replace the investment for a missing participant?

[Peter Gulia]

A PWBA interpretation suggests a fiduciary may override a participant’s last investment direction when the participant “can no longer be located” and the individual’s investment seems no longer prudent.

ERISA Advisory Opinion No. 96-02A (Feb. 9, 1996) https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/advisory-opinions/1996-02A.pdf.

BenefitsLink neighbors, are you aware of any plan that replaces a “missing” participant’s investment?

[Paul I]

I have not seen a plan take this specific action.  I have seen situations that effectively yield the same result.  For example, as a result of a change in recordkeeper all participants were required to make new investment elections.  The accounts of missing participants in some instances are defaulted into the QDIA.  In other instances, these accounts were defaulted into the fixed income option.

It also is interesting to note that the PBGC's acceptance of account balances for missing participants when a plan is terminated also yields a similar result.

I have not seen any instance where missing participants' account balances were invested at the direction of a plan fiduciary.  The AO says that was acceptable but notes that the plan fiduciary would not 404(c) protection.