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Lost Participants - I Ain't Missing You At All!

Nope, this isn’t an article about bad pop songs from the 1980s, but it is about something that can be just as much of a bother – lost participants with remaining balances in your retirement plan. When you are trying to wrap up a plan termination, there are few things as frustrating as trying to locate those last few missing participants. Fortunately, there are some helpful rules that provide guidance on how to handle these situations.

The Department of Labor spells out 4 steps that plan sponsors should take to try to locate missing participants.

  • 1.  Certified Mail. Send a certified letter to the participant’s last known address. If he or she signs for it, you have confirmation of receipt.


  • 2.  Check Related Records. The recordkeeper may not have a current address, but perhaps the company’s payroll provider or health insurer has something more up to date. Reviewing other company and plan-related records may turn up a location.


  • 3.  Check with Designated Beneficiary. Usually, a beneficiary is someone close to the participant, such as a spouse or a family member. If the participant is missing, perhaps his or her beneficiary knows where to look.


  • 4.  Use Free Electronic Search Tools. There are all sorts of free tools on the internet that might help. These include search engines, social media or public record databases such as those for licenses or real estate holdings. Plan fiduciaries should make use of these types of services.


The DOL goes on to suggest that plan fiduciaries should consider any relevant facts and circumstances to determine if other actions should be taken if these steps do not turn up any results. For example, using a commercial locater service or various paid internet search tools. Since the fees incurred in doing the search can be charged to the participant’s account, one relevant factor is the size of the account balance in question.


No Luck! Now What?

If the above actions do not result in a current location, the DOL provides several options for how to handle the plan balances. The preferred option is to rollover the account into an IRA in the participant’s name. This would work just like the automatic IRAs that are setup under the mandatory cash-out rules, and if the plan already has an automatic IRA provider, that same provider should be able to help here.


A second option is to escheat the remaining balance. This involves transferring it to the unclaimed property fund of the state of the participant’s last known residence or work location.

Another option that comes up from time to time is 100% tax withholding. This is where the participant’s entire balance is sent to the IRS as a tax payment, reported under that participant’s social security number. The thinking is that it would then get reconnected to the participant when he or she files a tax return. The problem is that DOL says doing so is a violation of a plan fiduciary’s duty under ERISA.

Additional information about these rules is available in DOL Field Assistance Bulletin 2014-01.


The content of this website is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances.