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Retirement Dollars in Limbo – Plan Participants MIA
By: Michelle Higgins
Missing plan participants (or their beneficiaries) present significant challenges for retirement plan sponsors seeking to maintain compliance with applicable laws and plan documents. Plan sponsors often first discover that participants are missing when statements, summary annual reports, or other communications are returned to the plan sponsor as undeliverable with no forwarding address provided.
While plan sponsors generally inform participants of their duty to keep their contact information up-to-date, problems abound.
How does this happen?
Plan sponsors may lose touch with participants for several reasons. Retirees or former employees may have moved without providing forwarding information or, in some cases, the plan sponsor may have bad data from the outset. Sometimes participants provide erroneous information such as dates of birth, Social Security numbers, or ZIP Codes.
Participants and beneficiaries may also lose track of plans in which they previously participated as they transition between jobs — a common occurrence due to the nature of today’s mobile workforce. This is further complicated as companies go out of business, declare bankruptcy, are acquired, spin-off, or merge with other companies.
As plans are terminated or merged as a part of corporate restructuring, it is difficult for plan sponsors and participants to keep track of one another. Plan sponsors have no automatic method to keep information updated if former employees fail to inform them of address or name changes. However, plans have a duty to try locating missing participants, and failure to make reasonable efforts could pose risks.
How much is at stake?
The Department of Labor (DOL) estimates that during 2014 (the most recent data available), there were more than 42 million inactive participants in qualified plans, with a portion of those simply missing. Although total dollars attributable to missing participants has not been determined, 16 million unclaimed accounts exceeded $8.5 billion between 2004 and 2013.
What to do?
Despite the onus being on participants or beneficiaries to keep their former employers up-to-date with address or name changes and responding to communications, plan sponsors have to do their part in finding missing participants.
The DOL recommends that, at a minimum, fiduciaries should take all the following steps before abandoning efforts to find a missing participant.
  • 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.
  • Check Related Plan and Employer Records. While the records of the terminated plan may not contain current address information, it is possible that the employer or another of the employer’s plans, such as a group health plan, may have more up-to-date information.
  • Check With Designated Plan Beneficiary. Try to identify and contact any individual that the missing participant has designated as a beneficiary to find updated contact information.
  • Use Free Electronic Search Tools. Use internet search tools that do not charge a fee to search for a missing participant or beneficiary such as public record databases, obituaries, and social media.
If a the above does not find the missing participant or beneficiary, consider taking additional steps, based on the facts and circumstances. These might include using commercial locator services, credit reporting agencies, information brokers, investigation databases, and similar services that may involve charges.
Employers that have well-documented processes for keeping track of participants or beneficiaries will be one step closer to better compliance. Showing that you’ve taken all reasonable efforts to locate a missing participant can not only help protect the company, but help former employees claim their benefits.
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