Locating Lost or Missing 401k Plan Participants
Many employers discover that finding missing participants can be next to impossible. However, employers are required to take all reasonable means to locate a participant to fulfill their fiduciary obligations under ERISA with respect to: (1) locating a missing participant of a terminated defined contribution plan; and (2) distributing an account balance when efforts to communicate with a missing participant fail to secure a distribution election.
There are a number of strategies and options available.
Confirm the Address: Use certified mail to confirm the validity of the participant's last known address.
Beneficiaries: When someone participates in a 401k plan, they have to name beneficiaries to the assets within the account. Contact these beneficiaries to see if they have a current mailing address for the participant.
Emergency Contact: Look at the person's job application or other employee records for an "in case of an emergency" contact.
Employer Records: Check all employer records and other benefit plan related documents for alternate addresses for the participant.
Internet Search: Complete an Internet search including popular social network sites.
The National Registry: This is a website where plan sponsors, plan administrator, custodians, or other plan service providers can register the names of missing plan participants who have unclaimed retirement funds. Individuals who think they may have old 401k accounts simply enter their social security number and the database is searched for any nationwide matches. If there are any matches, the person shown who the employer(s) is that has retirement money and is also asked to provide your current contact information so that this employer may contact them and make arrangements for distribution.
Locator Service: Using a private locator service will frequently be successful.
IRS Letter Forwarding Program: Until August 31, 2012, one option available to a sponsor was the IRS's Letter Forwarding Program. This program is no longer available. You can read more about the program cancellation here.
SSA Letter Forwarding Program: The Social Security Administration (SSA) has discontinued its letter forwarding service. Click here for more information.
Finally, be sure that all efforts made to locate the participant are well documented.
Here are some additional resources:
Abstract: A plan fiduciary make reasonable to find missing participants and distribute benefits on their behalf. They must also be able to demonstrate compliance with ERISA’s fiduciary standards for all decisions made and demonstrate compliance using paper or electronic records. This FAB reviews how fiduciaries can fulfill their obligations under ERISA to locate missing participants and properly distribute the participants' account balances.
Abstract: Given the availability of a number of alternative resources, as a practical matter, the elimination of the IRS's letter-forwarding program should not adversely affect plan administration or operations.
Abstract: Many VCP submissions designate the IRS letter forwarding program as one of the methods that will be used to locate former participants. As a result, the IRS may contact the plan administrator to revise the proposed correction method in a pending VCP submission, particularly if no alternative method of locating former participants has been proposed. Alternative methods will have to be proposed in all new VCP submissions.
Abstract: There are widespread reports of Department of Labor audits focusing on plan procedures with respect to "missing participants." The DOL is treating the failure to adopt and follow adequate missing participant search procedures as a fiduciary breach and a possible prohibited transaction. This article reviews current rules and practice with respect to missing participants.