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Missing Participants in a 401(k) or 403(b) Plan: Enhanced Regulatory Guidance

August 28, 2014

The Department of Labor just released updated guidelines for handling missing and lost participant monies in a company sponsored retirement plan, particularly when the plan is closing down.  These guidelines can also be used by employers who are left with the responsibility of caring for monies for participants who can no longer be located.

Field Assistance Bulletin 2014-01 (http://www.dol.gov/ebsa/regs/fab2014-1.html) released by the Department of Labor (DOL) on August 14, 2014, was released in an effort to help companies handle retirement plan accounts (401(k) and 403(b)) for lost or missing participants.  The aim of the additional guidance, from the DOL, is to help fiduciaries to a retirement plan properly discharge their obligations to missing or lost participants.

The most common misconception that employers have about a participant’s account balance is that when the participant is no longer working for the company (or cannot be reached/located), the employer is no longer responsible to this participant or their monies.  The regulations detail quite the opposite.  In fact, section 403(a) of ERISA generally requires that a trustee must hold the assets of a plan in trust.  Furthermore, plan fiduciaries are charged with the responsibility of making reasonable efforts to locate lost or missing participants.

A number of suggestions are made by the DOL, in its Bulletin, to employers regarding acceptable methods of locating lost or missing participants and beneficiaries.  The DOL supports the following activities when employers search for missing or lost participants:

  1. Use Certified Mail.
  2. Check Related Plan and Employer Records for alternative contact information.
  3. Contact the Participant’s Designated Plan Beneficiaries, they may know how to locate the participant.
  4. Use Free Electronic Search Tools.
  5. Additional Search Steps when Appropriate.  A plan fiduciary should consider the size of a participant’s account balance and the cost of further search efforts in deciding if any additional search steps are appropriate.  Possible additional search steps include the use of Internet search tools, commercial locator services, credit reporting agencies, information brokers, investigation databases and analogous services that may involve charges.
  6. Last Resort Methods. If all search options have been exhausted and a participant cannot be located, the DOL authorizes, in certain circumstance, the following two options:
  7. Opening an interest-bearing federally insured bank account in the name of the missing participant or beneficiary; or
  8. Transferring the account balance to a state unclaimed property fund.

The DOL is also trying to “get with the times” by supporting internet search technology as an approved method for locating missing or lost participants even going as far as to provide for a “safe harbor” if employers take certain steps to locate missing or lost participants.  Even if the search is unsuccessful, the DOL would likely deem the search as acceptable.

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