Posted on May 7, 2020

Missing or unresponsive retirement plan participants pose a challenge for plan sponsors, who have a fiduciary responsibility under ERISA to locate them and pay benefits. In some cases, plan sponsors have the contact information for plan participants, but these individuals - for whatever reason - ignore communications and fail to start their earned benefits at retirement age.

In other cases, plan sponsors are unable to locate participants or beneficiaries, sometimes because contact information has not been updated or the plan has lacked accurate or complete records. Given the mobility of the workforce and the increased use of auto-enrollment plans, employers can all too easily lose track of former employees. In addition, participants may not even be aware they have a retirement plan balance.

The Department of Labor recommends that plan sponsors make reasonable efforts to find missing or unresponsive participants, using the following methods:

  1. Certified Mail. Certified mail to the participant’s last known address is a low-cost way to find out whether the individual can be located in order to distribute benefits. Notices can also be sent to any other contact information on file, such as email addresses.
  2. Checking Related Plan and Employer Records. Plan fiduciaries must ask both the employer and administrator(s) of related plans to search their records for a more current address for the missing participant.
  3. Checking with Designated Plan Beneficiaries. Plan fiduciaries must try to identify and contact any individual that the missing participant has designated as a beneficiary (e.g., spouse, children, etc.) to find updated contact information for the missing participant.
  4. Free Electronic Search Tools. Plan fiduciaries must make a reasonable effort to search for a missing participant or beneficiary using free Internet search tools. Online services include Internet search engines, public record databases, obituaries, and social media.

Plan sponsors may also opt to use a paid commercial locator service or a credit reporting agency to locate missing participants, especially if the account balance warrants additional effort. It’s important to document all the steps taken to locate the participant to defend against possible Department of Labor claims.

As with other business challenges, having appropriate processes and procedures in place from the start can help plan sponsors stay in contact with participants and avoid potential liability in an audit. Best practices include the following:

  • Maintain multiple points of contact, such as mailing addresses, phone number, email addresses, etc. and regularly update contact information for current plan participants. Send reminders to employees to notify the plan sponsor about any changes in their contact information.
  • Review the plan’s process for identifying and locating missing participants with the plan’s third-party administrator (TPA)
  • Ensure that all appropriate records are passed to successors in the event of a merger, acquisition, or change in the TPA.
  • Review the stipulations in the plan document regarding missing or unresponsive participants and stay updated with DOL and IRS requirements.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.

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