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Missing participants and uncashed checks can hit fiduciary pocketbooks


The DOL is accelerating efforts to make sure those participants are not overlooked.

The DOL has rolled out a national effort to make sure defined benefit plans are making reasonable efforts to find missing participants. While the DOL may not be performing this specific type of audit on defined contribution plans just yet, the issue of uncashed distribution checks remains high on the DOL’s radar—and may be their next focus area.

Make a reasonable effort.

Plan sponsors of defined benefit or defined contributions plans (e.g., 401(k) and 403(b) plans) would be well advised to make (and document) a reasonable effort to locate terminated participants and provide them with the ability to request a distribution and, in the case of participants who have received a distribution but have not cashed the check, ask them to send a new check. And while it hasn’t seemed that important in year’s past, it is now, as plan fiduciaries may be held in breach of their fiduciary responsibilities.

You can start locating the missing terminated participants, including beneficiaries who are owed a benefit, now to avoid expensive ramifications later. Here are four steps the DOL considers reasonable effort and recommends you take to find missing beneficiaries.

  1. Use certified mail. Certified mail is an easy way to find out, at little cost, whether the participant can be located in order to distribute benefits.
  2. Check related plan and employer records. While the records of the employer may not contain current address information, it is possible that the plan itself or another of the employer’s plans, such as a group health plan, may have more up-to-date information. You 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, you can request that the employer or other plan fiduciary forward a letter for the plan to the missing participant or beneficiary to request that he or she contact you directly.
  3. Check with any beneficiaries. You must try to identify and contact anyone whom the missing participant designated as a beneficiary (e.g., spouse, children, etc.) to find updated contact information for the missing participant. Deal with privacy concerns as in #2 above.
  4. Google it. You must make reasonable use of Internet search tools that do or do not charge a fee to search for a missing participant or beneficiary. Such online services include Internet search engines, public record databases (such as those for licenses, mortgages and real estate taxes), obituaries and social media.

At the same time, plan sponsors must report terminated plan participants who still have a balance in the plan on IRS Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits. You must report terminated participants on Form 8955-SSA no later than by the end of plan year following the plan year employment terminated if the participant has not received a complete distribution of their retirement benefit by that time.

There are other steps, some simple, some more expensive or complex, that you can take to track down people owed a distribution of some sort. We’d be happy to recommend a strategy for you based on what your specific case looks like.

Do you have a lot of terminated participants who are owed a little money, or do you have just a few, but the total distribution is likely to be sizeable? We can make recommendations and walk you through your next steps in the process.

For more information on the newest DOL audit initiative or other benefit plan questions, please contact Bill Enck.