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Case of the Week: Locating Missing Plan Participants

The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with an advisor in California is representative of a common inquiry related to locating terminated participants for the purpose of paying out plan assets. The advisor asked:

A client of mine, who is a plan sponsor, has repeatedly attempted to contact several terminated plan participants regarding their plan account balances. In each case, the mail has been returned. What are the plan sponsor's options at this point? Is he required to make a certain number of attempts to reach missing participants?

Highlights of Discussion

• The Department of Labor (DOL) has issued guidance on this matter in Field Assistance Bulletin (FAB) 2004-02. But it is in need of updating as some of the government-sponsored search methods have been discontinued.
• According to FAB 2004-04, before being able to distribute the missing participants’ assets according to the terms of the plan, the plan sponsor must first attempt to locate the participants using the following methods. 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. Each is explained in more detail in FAB 2004-2.
1. Use certified mail.
2. Check with the administrator of the employer’s health plan to attempt to obtain additional participant contact information.
3. Contact the plan participant’s designated beneficiary for the plan for participant contact information.
4. Use a letter forwarding service. Unfortunately, the IRS dropped its letter-forwarding service in 2012 and the Social Security Administration is set to cease its program as of May 14, 2014.
• A plan fiduciary also should consider the use of Internet search tools, commercial locator services and credit reporting agencies to locate missing participants. Depending on the facts and circumstances concerning a particular missing participant, it may be prudent for the plan fiduciary to use one or more of these other search options. If the cost of using these services will be charged to the missing participant’s account, plan fiduciaries will need to consider the size of the participant’s account balance in relation to the cost of the services when deciding whether the use of such services is appropriate.

Conclusion

When a terminated plan participant has gone missing, the plan sponsor is obliged to follow the DOL’s prescribed locating methods before being able to distribute plan assets. Financial advisors who can demonstrate their knowledge of the search requirements related to locating missing plan participants are better positioned to help their plan sponsor clients, and set themselves apart from the average advisor.

The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.

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