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It remains unclear how much effort a single-employer individual-account retirement plan’s administrator must put into finding another address for a participant if the administrator receives information suggesting that the participant no longer is at the address the participant furnished (and perhaps neglected to update).  Administrators have expressed concerns that some EBSA examiners suggest unreasonable efforts.

 

Some of the tension results because not all of an employer/administrator’s cost is visible as an expense.

 

Of those service providers that offer § 3(16) services, do any of them offer the service of finding better addresses on “missing” participants?

 

Does that service have a distinct fee, or is it embedded in an overall fee?

 

If there is a distinct fee, is it charged against the account of the to-be-located participant?

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We don't do 3(16) services, but our clients have access to very reasonably priced searches for missing participants through the auto-rollover provider their plans use, Millennium Trust. We've had really good results and none of our clients has complained about the fees. 

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Kevin C, thank you for the helpful information.

Does anyone have an experience with a client having the plan (rather than the employer) pay a locator service's fee?

Does anyone have an experience with a client charging the locator fee against the account of the to-be-located participant?

 

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46 minutes ago, Fiduciary Guidance Counsel said:

Kevin C, thank you for the helpful information.

Does anyone have an experience with a client having the plan (rather than the employer) pay a locator service's fee?

Does anyone have an experience with a client charging the locator fee against the account of the to-be-located participant?

 

I would say most of my clients the sponsor pays the locator fee not the plan.  

I have never seen the plan pay the fee and it is part of the general fees. 

I think my current firm has a few clients have the plan pay and it is charged against the account.  I want to say it is disclosed in several places most notable the distribution forms regarding what happens if you postpone your distributions.   

These fees just aren't that big so I just see too many people get too worked up about them.  The most expensive firm we use has a sliding scale that charges for a few people is around $20/person.  I think for lots of people it can drop to <$10/person.  It is for more than a search.  They will do a search using multiple sources.  They send a confirmation letter.  They check the government's database of SSNs reported of people who are deceased.   They send you regular reports on people found.  They send a summary report describing all their methods and efforts so you can build a case you have done your due diligence to find the person so you can justify whatever the plan document says you do to lost participant accounts. 

As noted Millennium Trust this is part of their service if you send the balance to them to set up as an IRA.  They do a regular search for the IRA owner. 

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ESOP Guy, thank you for the further information.

BenefitsLink mavens, one of the issues I've been asked to think about is whether it's prudent for a plan's administrator to engage the locator service once each year if the fees charged against a to-be-located participant's account would substantially reduce her benefit.

 

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On ‎1‎/‎12‎/‎2019 at 3:55 PM, Fiduciary Guidance Counsel said:

BenefitsLink mavens, one of the issues I've been asked to think about is whether it's prudent for a plan's administrator to engage the locator service once each year if the fees charged against a to-be-located participant's account would substantially reduce her benefit.

 

If the participant's account balance is small enough that the search fee substantially reduces it, I would expect the balance to be well under $5,000.  With auto-rollover providers available who will take accounts less than $1,000, having the cashout apply all distributions under $5,000 should take care of most of this kind of situation.  One of the reasons we use Millennium is that they search for missing participants who are rolled over.

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We provide 3(16) services and we use a firm called lifestatus360 to find missing participants.  They have an ad hoc service that is less than $2.00 per participant that we use for address searches.  We usually get results back in minutes and we have found them to be very accurate.  We do missing participant searches on a regular basis (but no more than once per year for any participant).  There is a fee for the service that we charge directly to that participant's account.  The fees are disclosed in things like the 404a-5 notice and the SPD.  We do this search after we have mailed the distribution package and have it returned as undeliverable and before we would do an auto rollover (if applicable).  If we do an auto rollover, we use M2 Trust (formerly Colorado National Bank) who then also uses a similar process as Millenium to try to find people for payout.  

Since we also use their (lifestatus360) death audit database, we can also search the death records for missing participants, at no additional charge.  From there, we can usually locate an obituary, which may list a spouse and children, etc.  If we need to order a death certificate, they will quote us a fee for that service.

For our DB plans and death audit searches, we submit a participant list to them every year and they check daily to see if they have been reported as deceased either via Social Security, a state database or an obituary.  I get a daily report if anyone shows up on any list.  It is an annual fee for that service, paid by the employer or the plan.

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On ‎1‎/‎14‎/‎2019 at 2:29 PM, Fiduciary Guidance Counsel said:

But would Millennium or another provider accept a payment if it is not an eligible rollover distribution (because, for example, it is a minimum distribution)?

 

No, it must be an eligible rollover distribution. 

Also, Millennium won't accept a rollover if the SSN is known to be incorrect.

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In addition to Millenium, the other big player in the missing participant biz is PenChecks. We have used them on forceouts of less than $1K as well as up to $5K; for distributions to non-locatable or responsive participants when a plan was terminated; and to handle returned distribution checks. I know that at least in most cases fees were assessed against the participant's account, but as we usually try to minimize contractual intermediation for this service, not sure if any other fee arrangements were made between the parties.

 

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