The U.S. Department of Labor has announced a new enforcement relief policy allowing retirement plan administrators to transfer small unclaimed benefits to state programs under specific conditions. Under the policy announced January 14, 2025, plan fiduciaries can transfer retirement benefits of $1,000 or less to state unclaimed property funds without facing federal enforcement action.
The policy addresses a growing challenge for retirement plan administrators who manage billions in unclaimed benefits. When employees change jobs and lose touch with former employers, their retirement account balances can sit dormant for years. Before this policy, administrators faced uncertainty about how to manage small unclaimed balances while remaining compliant with federal fiduciary standards.
“This policy gives fiduciaries an additional option for handling small outstanding retirement benefit payments owed to missing participants and beneficiaries,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “Our goal is to reunite participants and beneficiaries with their retirement benefits.”
The relief only applies to ongoing retirement plans—not plans that have been terminated. Plan administrators must still follow strict requirements, including conducting thorough searches for missing participants and selecting state unclaimed property programs that meet federal standards.
Requirements for Transfer Relief
To qualify for the enforcement relief, retirement plan fiduciaries must meet several conditions designed to protect missing participants. They must show they have made prudent efforts to locate the missing person, consistent with the Department of Labor’s missing-participant search best practices.
The state unclaimed property fund must also meet minimum standards outlined in the policy. Plan administrators must inform participants of this option via their Summary Plan Description (SPD), and they must select the appropriate state fund based on the participant’s last known address.
The $1,000 threshold applies to the present value of the entire benefit payment; outstanding plan loans do not count toward this limit, but rollover-eligible amounts must be included in the calculation.
Impact on Business Owners and Plan Participants
For retirement-plan sponsors, the policy clarifies administrative options when dealing with missing participants. Small business owners, in particular, may find this relief helpful when dealing with former employees who’ve moved without updating their contact information.
The policy doesn’t change participants’ rights to their benefits. Individuals who believe they may have unclaimed retirement benefits can still search state unclaimed-property databases or contact former employers. The new policy simply provides another avenue for unclaimed-benefit amounts to be preserved until owners can be located.
Plan fiduciaries remain responsible for choosing an appropriate state fund consistent with federal standards and ensuring proper participant notification. Failure to meet the policy conditions may result in enforcement action or breaching fiduciary duty.
Looking Ahead
The Department of Labor categorizes this as a temporary enforcement relief policy as it works toward issuing more comprehensive guidance. The agency has not specified whether the policy is retroactive or whether it may be expanded beyond small distributions from ongoing plans.
The guidance reflects a shift away from prior agency preference for automatic-rollover IRAs when handling small missing participant distributions. The policy acknowledges scenarios where IRA rollover options may not be feasible or suitable for small unclaimed amounts.