Part 1 of this series summarized a plan’s duty to search for missing participants and discussed the current and possible future sources of law that create that duty. This Part 2 compares each agency’s current minimum search requirements as well as the proposed search requirements in the Retirement Savings Lost and Found Act of 2018, and highlights steps plan administrators may take to minimize audit liability.
Department of Labor
The DOL’s guidance has been limited to minimum search requirements with respect to terminating plans, but future guidance related to ongoing plans would likely be similar. Field Assistance Bulletin 2014-01 requires a plan administrator to take the following steps:
Send certified mail to all known addresses of the participant;
- Review related plan (such as a group health plan) and employer records for more up-to-date information (HIPAA concerns could be addressed by requesting that the related plan or employer directly contact the individual and request that the participant or beneficiary contact the searching plan fiduciary);
- Identify and contact any individual whom the missing participant designated as a beneficiary; and
- Use free electronic search tools, including search engines, online and public record databases, obituaries, and social media.
Additional search steps may be necessary if the size of the benefit is large enough to justify additional plan expenses. The fiduciary should consider the size of a participant’s account balance and the cost of future searches.
In recent audits, the DOL has also taken the position that plan administrators should perform searches indefinitely for the same individuals on an annual basis using different search methods each time, should attempt contact through any available phone numbers, and should attempt to contact current and former employees who worked at the same time as the missing participant. The acting director of the DOL’s Employee Benefits Security Administration indicated future guidance is forthcoming.
Internal Revenue Service
In its February 23, 2018, memorandum, the IRS stated a required minimum distribution failure with respect to a missing participant or beneficiary will not occur if the plan takes the following steps:
- Search plan and related plan, sponsor, and publicly-available records or directories for alternative contact information;
- Use a commercial locator service, credit reporting agency, or proprietary internet search tool for locating individuals; and
- Attempt contact via U.S. Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).
Pension Benefit Guaranty Corporation
The PBGC’s missing participant program requires plan administrators to “diligently search” for missing participants prior to close-out of a plan, which includes the following steps:
- Use of a commercial locator service, or,
- For distributions amounting to $50 or less per month, a “records search” including all of the following:
- A search of plan records, records of the plan’s contributing sponsor that is the participant’s most recent employer, and records of the contributing sponsor retirement and welfare plans under which the individual was a participant;
- Contact with each beneficiary of the aforementioned plans; and
- A free internet search of public records, social media, or other free locator resources.
Retirement Savings Lost and Found Act of 2018
Though it is unclear how any final version of this bill will compare to what was recently introduced in the Senate, the current version of the bill has borrowed search standards from the standards described above. To satisfy the fiduciary and minimum required distribution safe harbor, plan administrators would be required to:
- Satisfy annual plan registration requirements in Code Section 6057(a);
- Make at least one unsuccessful attempt to contact the individual at the most recent address maintained for the individual in the plan’s records via certified mail (or electronic mail if no other contact information is available); and
- Take at least one (two if the first attempt was through electronic mail) of the following additional steps:
- Review related plan and plan sponsor records for updated information;
- Make at least one unsuccessful attempt to contact the individual’s designated plan beneficiary;
- Conduct an electronic search using free search tools (public records, social media, etc.); or
- Use a commercial locator service
Steps to Take
- Develop – and follow – procedures the plan will use to locate missing participants consistent with the standards discussed in this article;
- Document all efforts to reach missing participants;
- Work with other departments, such as human resources, to maintain updated files on employee information.