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Cannot Locate Beneficiary


dv13

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Participant is deceased as of 2013. Beneficiary cannot be located. The plan document does not have any language about what happens in this instance. I've seen docs give a 3-year window for the plan sponsor to retain the payment obligation, but I'm not sure if there's a compliance reason for that. Does state law dictate this situation? Can the plan be amended to include language now? What is the proper way to handle this? Does the client report this as 'paid' to the IRS at some point?

Thanks!

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I am very surprised they is no language for default beneficiary (ies) in the document. It is likely 'hiding' from you, especially if the document is based on one from a national provider. If not under the definition section, then try the distribution section.

Get it in PDF format and search, or ask the document provider.

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Have you checked the Master Text of the document or just the Adoption Agreement. It is usually spelled out in the Master Text.

It is also often listed in the Summary Plan Description. While not definitive you might want to check in there.

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This is a 409A plan document and it has been searched thoroughly for instruction regarding the inability to locate a beneficiary with no success. It is an individual agreement, not a master with adoption agreement. The only statement even close to fitting the situation is that "if the participant did not designate a beneficiary then the death benefit shall be paid to the participant's estate." Assuming I can apply this to the situation of not being able to locate a designated beneficiary, the death happened over 2 years ago.

For purposes of answering my initial questions, let's assume the doc is silent on the issue and the estate is closed. Now what? The company is tired of looking for the beneficiary and wants to know what to do with the payment owed. There are concerns about a delay in payout under 409A, as well as a question of whether the plan sponsor can keep the money (after a certain period of time . . . 3 years?).

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The money belongs to the beneficiary, or if the beneficiary is deceased his or her estate. What have you done to try to locate this beneficiary? Have you retained a search firm? Have you advertised in legal publications in the locale of the last known address?

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We are the TPA. We have not tried to search for the beneficiary at all. Our client is saying that they have attempted to find one and have not been able to and are tired of looking. We have directed the client to their own legal counsel, but I thought the topic was interesting enough to see what options may exist for this scenario.

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Well, it's a conundrum. Assuming good faith efforts have been made to find the beneficiary I would say that 409A ramifications and tax issues generally are the least of the employer's worries here (in fact no worries at all as a practical matter). I would have legal counsel consider (a) whether this is an ERISA top hat plan, an ERISA non-top hat plan, or a non-ERISA plan, (b) based on the answer to (a) the obligations of the employer-plan sponsor in searching for the beneficiary, © based on the answers to (a) and (b) the limitations period during which a beneficiary or an heir to the beneficiary can crawl out of the woodwork and sue for the money, and (d) based on the answers to all whether escheat may be the required remedy.

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  • 1 month later...

I have found every single beneficiary that is missing for our plan. I asked a third party to run their socials and provide me with their updated names and last known mailing address (most 401K providers have a vendor that they use and also banks/trust do this as well). It does cost $ to do the search. I sent a brief letter to that person letting them know that I need to talk to them about "deceased employees name" and if they could contact me. If the search does not come back with contact information, I pay additional money to have the social security number ran directly against SSA to see if the beneficiary is deceased. If that doesn't work, I just call SSA and let them know the situation, they may be able to help you. I cant tell you the number of times I just found the beneficiary by typing in the deceased retirees or former employees and the word obituary. I call the funeral home and often the person paying for the funeral is the beneficiary as well and the funeral home contacts that person and lets them know that our company is trying to reach out to them. I also have a lot of luck just typing in the persons name in the white pages. One time I found someone through classmates (our employee) who was getting ready to hit 70 1/2 and they didn't even know they left money on the table.

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