Locating Missing Participants

A Segment in Our Retirement Rescue Series

In Field Assistance Bulletin (FAB) No. 2014-01, the U.S. Department of Labor clarified a fiduciary’s responsibilities when locating missing participants in a terminated defined contribution plan. The FAB reflects the elimination of the IRS and SSA letter-forwarding services and outlines required steps to avoid a fiduciary breach under ERISA.

Fiduciary Responsibility for Locating Missing Participants

Under ERISA, fiduciaries are required to locate missing participants, especially during plan termination. This ensures all participants are properly notified, and all accounts are distributed according to plan terms. Although the IRS and Social Security Administration no longer provide letter-forwarding programs, plan fiduciaries must still make reasonable and documented efforts to locate participants.

A fiduciary must follow specific steps to meet the duty of care and prevent a breach of fiduciary responsibility.

Required Search Steps for Missing Participants

The DOL requires that plan fiduciaries take the following reasonable, low-cost search steps. All efforts must be fully documented to demonstrate compliance:

  1. Provide Notice by Certified Mail: Send official notifications of the plan termination and account distribution.

  2. Verify Possible Addresses: Check the plan and employer records for potential current addresses.

  3. Contact the Beneficiary: Attempt to locate the participant through contact with their beneficiaries to obtain updated information.

  4. Use Online and Social Media Resources: Search through internet databases, social media platforms, and public records to find the missing participant.

  5. Further Search Methods: If the previous steps fail, evaluate whether additional search efforts are warranted based on factors such as account balance size and the cost/likelihood of success of further methods.

If Missing Participant Remains Unlocated

Once all reasonable steps have been taken, and the participant remains unlocated, the fiduciary must choose an appropriate distribution method. Acceptable alternatives include:

  • Individual Retirement Account (IRA): Establishing an IRA in the participant’s name.
  • Interest-bearing Bank Account: Opening a federally insured account in the participant’s name.
  • State Unclaimed Property Fund: Placing the funds in the state’s unclaimed property fund.

Note: The DOL emphasizes that the chosen method should preserve the tax-deferred status of the funds when possible.  100% income tax withholding is never acceptable as a method for handling missing participants’ benefits.

For Assistance with Missing Participants

If you need help, contact Ekon Benefits at (314) 367-6555 or via email at info@ekonbenefits.com.

Straight From the Source

Field Assistance Bulletin No. 2014-01. U.S. Department of Labor. Employee Benefits Security Administration. 14 August 2014. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2014-01