Locating Missing Participants
The regulations require that you provide all participants certain notices, including the restated Summary Plan Description that was sent to you. In most instances, routine methods of delivering notice to participants, such as first class mail or electronic notification, will be adequate. In the event that such methods fail to obtain from the participant the information necessary for the distribution, or the plan fiduciary has reason to believe that a participant has failed to inform the plan of a change in address, plan fiduciaries need to take other steps to locate the participant or a beneficiary.
You should take a number of steps in an effort to complete this requirement:
- Send the notice to the last known address of record. We recommend that you send the notice with return receipt requested, as additional proof that you made best efforts to get the notice to the individual (although this is not required by the regulations).
- Document your files when the package is returned. IRS agents ask about how you handle giving notices to terminated accountholders so having your process well documented is helpful.
- Engage in some of the Department of Labor approved search methods for missing participants. Each site listed below offers helpful guidance to finding missing participants:
- IRS: Missing Participants or Beneficiaries
- DOL: Missing Participants - Best Practices for Pension Plans
- DOL: Field Assistance Bulletin No. 2014-01
- DOL: Compliance Assistance Release No. 2021-01
- Conduct a web search and attempt to locate the individual. This has become very common in our industry. You can more often find individuals on Linkedin or via other search engines. We would encourage you to reach out to participants you are able to locate via social media, before more time goes by and the participant disappears. The company will continue to have an ongoing fiduciary obligation to the participant so long as monies remain in the plan on the participant’s behalf. This ongoing obligation includes but is not limited to transmission (or attempting to transmit) notices that arise from time to time. If you can find the participant via social media, you should attempt to reach out to them and have them complete a rollover/distribution form.
- If these methods fail to result in the participant engaging with you, we should discuss 2 additional options:
- Rolling the participant monies to an IRA and releasing the company of any ongoing responsibilities to the participant; or
- Utilizing the IRS letter forwarding program. Rolling participant monies to an IRA can be a very effective option.
As an additional note, reasonable expenses attendant to locating a missing participant may be charged to a participant’s account, provided that the amount of the expenses allocated to the participant’s account is reasonable and the method of allocation is consistent with the terms of the plan and the plan fiduciary’s duties under ERISA.
DOL Approved Search Methods
In the DOL’s view, some search methods involve such nominal expense and such potential for effectiveness that a plan fiduciary must always use them, regardless of the size of the participant’s account balance. A plan fiduciary cannot distribute a missing participant’s benefits in accordance with the distribution options discussed below unless each of these methods proves ineffective in locating the missing participant. However, a plan fiduciary is not obligated to take each of these steps if one or more of them are successful in locating the missing participant. These methods are:
- Use Certified Mail. Certified mail can be used to easily ascertain, at little cost, whether the participant can be located in order to distribute benefits.
- Check Related Plan Records. While the records of the plan may not have current address information, it is possible that the employer or another plan of the employer, such as a group health plan, may have more up-to-date information with respect to a given participant or beneficiary. For this reason, plan fiduciaries of the plan must ask both the employer and administrator(s) of related plans to search their records for a more current address for the missing participant. If there are privacy concerns, the plan fiduciary that is engaged in the search can request the employer or other plan fiduciary to contact or forward a letter on behalf of the terminated plan to the participant or beneficiary, requesting the participant or beneficiary to contact the plan fiduciary.
- Check With Designated Plan Beneficiary. In connection with a search of the plan’s records or the records of related plans, plan fiduciaries must attempt to identify and contact any individual that the missing participant has designated as a beneficiary (e.g., spouse, children, etc.) for updated information concerning the location of the missing participant. Again, if there are privacy concerns, the plan fiduciary can request the designated beneficiary to contact or forward a letter on behalf of the terminated plan to the participant, requesting the participant or beneficiary to contact the plan fiduciary.
- IRA Rollover Service. Establishing an individual retirement plan is the preferred distribution option because it is more likely to preserve assets for retirement purposes than any of the other identified options. We can assist you with this service. By regulation, the DOL established a safe harbor for plan fiduciaries to satisfy their fiduciary responsibility under section 404(a) of ERISA when selecting individual retirement plan providers and initial investments in connection with the rollover of certain mandatory distributions to individual retirement plans. In general, this regulation applies to distributions of $5,000 or less for separating participants who leave an employer's workforce without making an election to either receive a taxable cash distribution or directly roll over assets into an individual retirement plan or another qualified plan.
- Use A Letter-Forwarding Service. The Social Security Administration (SSA) offers a letter-forwarding service. Plan fiduciaries must choose one service and use it in attempting to locate a missing participant or beneficiary. The IRS has recently terminated their letter forwarding service. The SSA’s letter forwarding service may be used for similar purposes, and is described on the SSA’s Web site. The SSA will search their records for the most recent address of the missing participant and will forward a letter from the plan fiduciary/requestor to the missing participant if appropriate. The SSA will not notify the plan fiduciary as to whether the participant was located and it may take up to 2 years or more for these agencies to transmit the letters.
Let us know if you have questions or need assistance, we are always here to help.
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