Mile "Markers"

It may just be because I’ve got a birthday this week, but it would be hard to miss all the “fuss” about age and retirement during the NFL playoffs, a topic that now seems sure to carry on into the Super Bowl.

This past weekend we got to see two “old” quarterbacks fight it out for the NFC title—Tom Brady (43) and Aaron Rodgers (37)—and two young quarterbacks—Josh Allen (24) and Patrick Mahomes (25) lead their teams in the AFC championship. The inevitable comparisons will surely now carry into Super Bowl 55, as Brady becomes the oldest quarterback to reach that pinnacle (he was already tied with Peyton Manning for that status) and Mahomes (already) one of the youngest. (Ben Roethlisberger, at 23, holds the distinction of being the youngest, having wrested it in 2006 from… Tom Brady.) 

Their ages notwithstanding, this past weekend it seems fair to say that Brady played with the skill and energy of a younger man (even a younger version of himself), while Mahomes demonstrated the maturity and field generalship of one much older.

One’s age is a notoriously unreliable marker for progress and maturity, and yet it often serves as a milestone for many of our significant life points. For example, there’s the age at which you begin school (when that wasn’t a stay-at-home experience), that all-important 13^th birthday when one becomes a teenager, the age at which you are permitted to drive (one that generally also “ages” your parents), the age at which you can vote… and, of course, the one after which you can expect to be “carded” without incident. Prior to those “markers,” new parents can likely recite for you the various developmental timetables at which infants are expected to crawl, walk, talk and sleep through the night (the latter a particularly valued milestone). 

The preparation for retirement also has key milestones. ERISA provides certain age (and service) parameters for participation, of course, but down the road there’s: 

• age 50, when you can “catch up” on contributions you might have missed making when you had other obligations; 
• age 59½, when you can make untaxed savings without subtracting from them that 10% penalty for “early” withdrawal;
• age 62, when many (still) decide to begin drawing Social Security; and
• age 65, which is (still) considered to be something of an official age for retirement (even though those who are now that age will find that Social Security considers your full retirement age to be age 66 and change). 

More recently, we now have 72 (not so long ago, 70½), the age at which the IRS insists that you begin drawing what it deems to be a required minimum distribution of those as-yet-untaxed retirement savings.

Milestones—those numbered markers you can find along most major highways these days—date back to the early days of the Roman Empire. They were not only designed to tell you how far, but also to confirm that you were on the right road—and to provide some sense of the distance remaining to the desired destination. They can, of course, also serve as a handy reference point on traffic issues ahead.

For those on that road to retirement—and those who help them get there—these milestones can provide a valuable reminder of the opportunity, if not the need, to reassess and (re)evaluate regularly. 

However, they should also remind us all that this is a journey—one that has not only mileposts along the way, but a destination—and one where the timing of arrival may well be dictated by factors other than age, and beyond our control.

- Nevin E. Adams, JD

‘Missing’ Inaction?

Recent DOL guidance on missing participants seems to fall short of what plan fiduciaries want/need—but may offer fiduciaries some key insights to avoid future problems.

On Jan. 12, 2021, the Department of Labor (DOL) released a triple dose of guidance related to helping retirement plan fiduciaries meet their obligations under the Employee Retirement Income Security Act (ERISA) to distribute retirement benefits to missing participants.

Arguably the guidance, while welcome, is less than plan sponsors might have wished (and previously asked) for—and it concerns an issue that most plan sponsors of my acquaintance continue to insist isn’t one, though the Labor Department is clearly of a different mind. In fact, in the first of the three pieces of guidance, the Employee Benefit Security Administration (EBSA) cautions: “The first step in addressing any problem often is knowing that there is one.”[i]

The “issue,” of course, is fulfilling the fiduciary obligation to not only keep accurate records, but to take “appropriate steps” to ensure that the participants and beneficiaries are paid their full benefits when due. The question—and one that it seems remains, following the “guidance”—is, what are the “appropriate” steps?

To that end, the first document in the trio—titled “Missing Participants—Best Practices for Pension Plans”—purports to outline just that, the “best” practices. That’s helpful, of course—and if the steps outlined are familiar ground to most (and by no means the “safe harbor” that folks are hoping to get), it is perhaps at least nice to have the bulleted list. 

However, that it is issued alongside a Compliance Assistance Release (which, among other things, also describes the types of records and documents that EBSA has requested during its investigations in the recordkeeping or administration of benefits for terminated vested participants and beneficiaries and the red flags that it looks for) should heighten attention, even though the third component—a Field Assistance Bulletin—actually provides a temporary enforcement policy under which DOL will not pursue a fiduciary breach claim against a plan fiduciary that transfers the accounts of missing participants in a terminating DC plan to the Pension Benefit Guaranty Corporation (PBGC) as part of the PBGC’s missing participant program. 

All in all, it feels like something of a “warning”—alongside a checklist of things to look for in determining if, in fact, a plan fiduciary is living up to ERISA’s standard of care with regard to ensuring that those who have earned those promised benefits actually receive them.

In fact, the guidance does make certain “allowances.” For example, it notes that “not every practice below is necessarily appropriate for every plan,” and that “responsible plan fiduciaries should consider what practices will yield the best results in a cost effective manner for their plan’s particular participant population.” It also acknowledges that, “in deciding what steps are appropriate, plan fiduciaries should also consider the size of a participant’s accrued benefit and account balance as well as the cost of search efforts,” and that “the specific steps taken to locate a missing participant, or to obtain instructions from a nonresponsive participant, will depend on facts and circumstances particular to a plan and participant.”

That said, it also notes as a “best practice” that plan fiduciaries should have in place a written policy with respect to the plan's procedures on locating missing participants. 

And, taken in totality, as far as “guidance,” it’s hard not to see a cautionary element—and sense that the Labor Department is effectively cautioning plan fiduciaries/advisors that if such a policy is currently “missing” from your current plan toolkit—well, you might be well-advised to (re)consider it.

- Nevin E. Adams, JD

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[i] In fairness, In unveiling the guidance, Principal Deputy Assistant Secretary of Labor for the Employee Benefits Security Administration Jeanne Klinefelter Wilson noted that, “In fiscal year 2020 alone, EBSA’s investigators helped missing and nonresponsive participants recover benefits with a present value in excess of $1.4 billion.”