Managing uncashed retirement checks may be considered a nuisance by plan administrators.
Nevertheless, the employer still has fiduciary responsibility when a former employee fails to cash their distribution. Search efforts to locate a missing plan participant consume time and money and may fail to locate the participant. Likewise, going through the process of turning over dormant accounts to the state can also consume time and resources.
There are a few things you can do to decrease the burden of uncashed checks:
- Discuss with terminating employees during the exit interview the options for their retirement plan. They may forget they have a company-sponsored retirement plan, or don’t know how to manage it.
- Remind departing employees that they can roll over their retirement assets into their new employer’s plan. Your plan’s service provider or the new employer can answer questions the former employee may have about the rollover process.
- Make sure your plan allows for the forceout of small balances and that the plan provider has established an automated process for doing so every year. Assuming that process is in place, let exiting employees with an account balance of $1,000 or less know their accounts will be distributed from the plan within a certain amount of time, and have the employee verify their current address to where the check can be sent.
Remember, fiduciary responsibility and liability extends to terminated employees with assets in the plan. This responsibility includes delivery of all required distributions and all fiduciary prudence responsibilities. It’s very important to stay in touch with this group.
