"Hey, Ex-employee, I would like to send you money!" Really? Now how often do you find yourself as an Employer making that statement? Not often, right? But it does happen in connection with retirement plans.
Here's the drill - a person who was once a loyal, trustworthy, diligent, super hard working employee of yours (or not) either set aside money in your retirement plan as a salary deferral or you had the audacity to contribute money for them (perhaps a Match or Profit Sharing contribution). This money was so incredibly important to them that as soon as they left your employment they forgot all about it. Not only did they fail to give you back their plan distribution election forms, but ever since then they have failed to tell you where you can find them so you can send them their money. KInd of incredible considering how often when they worked for you, they asked you to "Give me more money!"
Yes, they are totally connected to the rest of the world through FaceBook, Instagram, Twitter, Google+ (wait a minute, does anybody use Google+?), etc., etc., but to you they don't exist. The NSA knows exactly where they are at this moment and Amazon could have a drone at their front door in 20 minutes, tops! Perhaps the participant did not want to receive all those stimulating, informative, easy to understand government mandated on-going notices about their retirement account.
Well, no matter how hard they play "hide and seek" with you, you still have a Fiduciary responsibility to find them. One of your 200+ Fiduciary responsibilities everyone keeps trying to scare you with so you will hire them to do something for you.
Anyway, the Department of Labor just released guidance saying how a terminated plan should try to find missing participants. Now I ask you this - how many terminated plans are there out there as compared to how many on-going plans? Hmmm... not much of a comparison - right? But yet the DOL provides guidance to terminated plans while never thinking to even mention whether or not on-going plans should follow the same guidance in finding their missing participants.
Here's the drill - a person who was once a loyal, trustworthy, diligent, super hard working employee of yours (or not) either set aside money in your retirement plan as a salary deferral or you had the audacity to contribute money for them (perhaps a Match or Profit Sharing contribution). This money was so incredibly important to them that as soon as they left your employment they forgot all about it. Not only did they fail to give you back their plan distribution election forms, but ever since then they have failed to tell you where you can find them so you can send them their money. KInd of incredible considering how often when they worked for you, they asked you to "Give me more money!"
Yes, they are totally connected to the rest of the world through FaceBook, Instagram, Twitter, Google+ (wait a minute, does anybody use Google+?), etc., etc., but to you they don't exist. The NSA knows exactly where they are at this moment and Amazon could have a drone at their front door in 20 minutes, tops! Perhaps the participant did not want to receive all those stimulating, informative, easy to understand government mandated on-going notices about their retirement account.
Well, no matter how hard they play "hide and seek" with you, you still have a Fiduciary responsibility to find them. One of your 200+ Fiduciary responsibilities everyone keeps trying to scare you with so you will hire them to do something for you.
Anyway, the Department of Labor just released guidance saying how a terminated plan should try to find missing participants. Now I ask you this - how many terminated plans are there out there as compared to how many on-going plans? Hmmm... not much of a comparison - right? But yet the DOL provides guidance to terminated plans while never thinking to even mention whether or not on-going plans should follow the same guidance in finding their missing participants.
The techniques called for in the guidance involve (in no particular order):
- Certified mail
- Check records of related plans and employer(s)
- Contact designated beneficiaries to ask about participants
- Use free Internet search tools (Is the the same as saying "Google it"?)
- If account balances are significant to justify plan expense, then a search service involving a reasonable fee can be use (and charged against the participant's account).
If after exhausting all of the above steps, a fiduciary still has not located the missing participant, they should consider distributing the plan account directly to an IRA rollover account which will continue the deferral of income, and avoid both the 20% mandatory withholding and the 10% early distribution tax. The technique some fiduciaries were apparently using of 100% withholding has been specifically ruled out as a reasonable method. But in an active, on-going plan, do not distribute without participant direction unless the account in under $5,000.
Here is the actual Field Assistance Bulletin 2014-01 if you would like to read all the detailed, stimulating, exciting, thrill-binding wording or if you are really suffering from a severe case of insomnia and need something more sleep-inducing than pills. Admit it - ain't you happy our firm has to read all of this stuff instead of you?
