Your Fiduciary Responsibility to Locate Unresponsive Plan Participants

Written By: Megan Senkowski, CPA

A common issue facing plan administrators of defined contribution plans relates to asset balances in their plans of terminated employees. Oftentimes, these balances can sit there for years, generating interest/investment income for the participant, as well as additional administrative expenses for the plan. In the case of smaller defined contribution plans (i.e. plans that average around 100 participants), employees that don’t rollover their balances to another plan or request a distribution upon termination could potentially continue to trigger an audit requirement for the plan in question. In these types of situations, it would be beneficial for plan administrator to take various measures to remove the assets from their plan. Sometimes it is easy as sending an email or letter, reminding the participant that they have left funds in the plan and provide them the paperwork to transfer the funds, if they desire. However, what is the fiduciary responsibility of a plan administrator to locate missing or unresponsive participants prior to discharging their obligations to these participants?

In August 2014, the DOL issued Field Assistance Bulletin No. 2014-01 (FAB No. 2014-01) “Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans”. Although geared toward terminated plans, this bulletin provides relevant guidance to all plan administrators, as it details various options to be utilized by plan administrators in locating participants, as well as appropriate methods to distribute the assets if location attempts are unsuccessful. Previously, plan administrators could utilize the IRS and Social Security Administration letter-forwarding services.  However, both of these options have been terminated. FAB No. 2014-01 recommends the following search methods:

  • Send email/first class mail to last known participant address;
  • Send notification via certified mail;
  • Check related plan and employer records;
  • Contact designated plan beneficiary;
  • Use of free electronic search tools.

When trying to locate a missing plan participant, the dollar amount of the participant account balance is NOT a factor - an effort to contact all participants is required. If the methods above are unsuccessful, a plan administrator needs to consider the size of the participant’s plan balance and the cost of additional search methods. For larger balances, commercial locator services, credit reporting agencies and/or investigation databases are additional, fee-based options.

Despite the efforts taken by a plan administrator, there will be situations in which location attempts of missing or unresponsive participants will be unsuccessful. The plan administrator can then consider distributing these balances into individual retirement plans, such as an annuity, as noted in Section 404(a) of ERISA. If the plan administrator cannot find a retirement plan provider to accept these rollover distributions for missing or unresponsive participants or chooses not to elect this option due to a specific reason (i.e. immaterial size of participant balance), he or she can choose from the following two options:

  • Opening an interest-bearing federally insured bank account;
  • Transferring balance to a state unclaimed property fund (however, the plan administrator must consider any state law requirements prior to selecting this option).

In summary, it is the plan administrator’s fiduciary responsibility to take reasonable steps to locate missing or unresponsive participants prior to distributing these assets from the plan. If these search methods are unsuccessful, the plan administrator needs to consider various factors (i.e. size of participant balance, etc.) prior to utilizing recommended distribution methods.  No matter how a plan administrator ultimately decides to handle plan balances related to missing or unresponsive participants, he or she should maintain documentation of steps taken throughout the search process and ultimate resolution on if/how the related assets are distributed.

If you have any questions or would like more information, contact our Employee Benefit Plan practice group today!


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