DOL Guidance on Finding Missing Participants in Terminated Defined Contribution Plans

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Posted on September 4th, 2014

The Department of Labor (DOL) issued a new Field Assistance Bulletin (FAB) 2014-01 on August 14, 2014 outlining the steps that a plan fiduciary should take to locate missing participants or beneficiaries. This new FAB replaces DOL’s FAB 2004-02.

The major change in this new FAB is that DOL has removed the Internal Revenue Service (IRS) and the Social Security Administration (SSA) letter-forwarding service methods as both IRS and SSA have discontinued those programs.

Highlights from the New FAB are as follows:

Plan Fiduciary must make reasonable efforts to locate missing participants or beneficiaries by following at a minimum the methods outlined below:

  • Use certified mail.
  • Check current related plan and employer records to see if a more current address can be found.
  • Try locating a designated plan beneficiary to find updated contact information of the missing participant.
  • Use free electronic search tools such as search engines, public record databases of mortgages, real estate taxes and licenses.

Once the above steps don’t help locating a missing participant, the plan fiduciary should consider additional steps depending on the size of the participant’s account balance. Such additional steps that may entail a charge include using commercial locator services, credit reporting agencies, information brokers, investigation databases and use of internet search tools. A plan fiduciary may charge missing participant’s account balance reasonable expenses for efforts to find them.

If all the above efforts don’t help in locating the missing participant, the plan fiduciary can use the following distribution options. They are listed in the order of preferred method.

  1. Set up an IRA in the name of the missing participant.
  2. Open up an interest-bearing federally insured bank account.
  3. Transfer the account balance to a state unclaimed property fund.

Option 2 & 3 create a taxable event to a plan participant hence option 1 is the most preferred method, DOL recommends using. The DOL still does not endorse a plan fiduciary to send the entire account balance to IRS by doing a 100% withholding.

If you have any questions you may contact Urmez Hozdar in our compliance department at 513-741-5800 x102 or your CRS Sales Consultant.

 

 

Source: Creative Retirement Systems – Cincinnati, OH