Lost and found: DOL guidance for finding missing plan participants

Many defined contribution plans include participants who are no longer employees, but a problem arises when former employees can’t be located or contacted. These “missing (or lost) participants” can have a significant financial impact on both terminated and active plans because related administrative costs and professional fees are often incurred.

For a terminating plan, missing participants can keep the plan from shutting down in a timely manner. For an ongoing plan that would not otherwise be required to have a financial statement audit, missing participants may cause the plan to exceed the number-of-participants threshold that triggers the audit requirement. Plan fiduciaries have responsibilities related to searching for these lost participants.

When a plan is terminated

When a plan is terminated, the Internal Revenue Code requires that the plan administrator distribute all of a plan’s assets as soon as administratively feasible after plan termination. Before making a distribution, the plan administrator has a responsibility to contact the plan’s participants for directions on how to distribute their account balances. This requirement applies to all participants, no matter how large or small their account balances are. The responsibility of searching for and locating missing participants lies with the plan fiduciaries.

Last year The U.S. Department of Labor (DOL) issued guidance on locating missing participants in Field Assistance Bulletin No. 2014-01, Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans. This Bulletin, which replaces the 10-year-old Field Assistance Bulletin 2004-02, outlines the minimum search steps that must be followed before abandoning efforts to find lost participants who remain in terminated defined contribution plans. The steps, as outlined in the Bulletin and below, are ordered by ease of use. The Bulletin does not require that fiduciaries must act in any particular order.

Use certified mail

The DOL provides a sample notice that can be used, but is not required, for certified mail.

Check related plan and employer records

Plan fiduciaries of a terminated plan are required to ask both the employer and administrators of related plans (such as a group health plan) for a more current address of the missing participant.

Check with designated plan beneficiary

Plan fiduciaries must try to identify and contact the beneficiary designated by a missing participant to request updated contact information. The records of the terminated plan or records of related plans should be reviewed.

Use free electronic search tools

Fiduciaries must make reasonable use of Internet search tools that do not charge a fee to search for a missing participant or beneficiary. The services include Internet search engines, public record databases, obituaries and social media.

All of the above steps should be taken and documented when searching for lost participants. The Bulletin also specifies that additional steps should be considered if appropriate.

Despite the efforts outlined above, fiduciaries may still be unable to locate some participants. The new Bulletin outlines the distribution options available to plan fiduciaries to complete the termination of the plan, including rolling over to an individual retirement plan (the preferred option).

While the Field Assistance Bulletin No. 2014-01 applies to terminated defined contribution plans, the search steps outlined above may also be beneficial to ongoing defined contribution plans with missing participants.

Source: U.S. Department of Labor Field Assistance Bulletin No. 2014-01

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