At one time or another all plan sponsors will likely be in the position of having to locate missing participants.
This may be related to delivery of regulatory required communications, distributing of assets, or communicating fund changes to active and/or terminated participants. If the delivery of necessary communications is encumbered because a participant cannot be located, there exists a fiduciary requirement to perform a “reasonable search” for this “missing” participant.
There are various search methods that would be considered as reasonable good faith efforts, including:
- Certified Mail (with a return receipt) to the last known address;
- Checking records of other benefit plans (i.e., employer provided health plan);
- Contacting designated beneficiaries;
- Utilizing free online searches;
- Using a commercial participant-locating or letter forwarding service, such as unclaimedretirementbenefits.com.
Many times, your retirement plan provider can assist with the search process as well.
If your plan allows cash-out distributions of terminated participants with account balances under $1,000, or rollover to IRA for balances between $1,000 and $5,000, typically a rollover to an IRA on behalf of these participants can be accomplished for those deemed to be missing.
Missing participants can create not only an extra challenge in plan administration, but also an additional fiduciary liability. Have you done a ‘reasonable search’ for your missing participants?
