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.
Finally, be sure that all efforts made to locate the participant are well documented.
Here are some additional resources:
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.
Missing and nonresponsive participants are a liability for any retirement plan. Undelivered notices, uncashed checks, and unreturned election forms all create compliance issues and additional administrative expenses. Unfortunately, a participant's "radio silence" gives the plan no relief from the obligation to keep accurate records and take appropriate steps to ensure that the participants and beneficiaries are paid their full benefits when due. The DOL has some reader-friendly advice for plan administrators. Here are the highlights.
Source: Erisadc.com, April 2022
ERISA has always required that plan fiduciaries maintain adequate plan records and distribute plan-related materials to participants and beneficiaries; however, there was no specific DOL guidance regarding missing participants, outside the context of plan terminations, until 2021, when the DOL issued such guidance in three distinct publications. Each of these important DOL publications is discussed here.
Source: Truckerhuss.com, February 2022