Terminated Plan had J&S, Unresponsive participant

[Guest Iwonder]

When there is no QTA involved, and a previously terminated (sponsoring co. has dissolved) plan provides for J and S, can assets be escheated?

In this case the ppt is unresponsive to delivered mail.

All plan assets were dist'd, except to this ppt.

Is there any definite guidance out there?

[Locust]

Something that has worked for me is to send a letter (assuming you have the right address) telling the individual that if he doesn't make an election that the plan will be forced to purchase an annuity contract on his behalf, that the fees of an individual annuity can be significant, and that the annuity will require payments over his lifetime, and if he is married over the lifetime of him and his wife. Make it clear that he won't have access to the money as easily and that there will be a cost.

[Leopurrd]

Locust is right...just make sure you send the letter requesting a return receipt.

if you find out they don't live there anymore, the plan sponsor is required to reasonably locate them. Try:

-IRS or SSA location program

-notifying beneficiaries of your search (from form)

-private programs or credit inquiries

again, as Locust suggested, make it clear that if they don't tell you to distribute the lump sum immediately, their funds will not be easily accessible later.

You are allowed to charge location expenses to the balance. If they still are missing after your search, your distribution form should be a "deferred QJSA, commencing at Normal Retirement Age", per my DC-3 book from ASPPA.

Vicki

[Guest Iwonder]

Both of you have given good guidance, and I thank you.

Is there any possibility of escheating these assets? There is no longer any plan (terminated), nor a plan sponsor (dissolved and gone).

Is escheatment an option, even an unattractive option? If so, under what circumstances?

[Locust]

If the participant is not lost, it is not an option. To establish that the participant is lost requires more, I think, than simply getting returned mail, as many people won't accept their mail for various reasons (maybe he is in a coma, in jail, or avoiding a spouse or creditor). If he or she is not lost, I think you have no choice but to get an annuity or get consent.

Even if lost, I'd try to purchase the annuity and let the insurance company deal with the escheat. Maybe you could get an insurance agent to handle this for the plan.

You might want to call the State Treasurer to see what the escheat rules are for this situation. Some ERISA people would take the position that you can't escheat directly from a plan - that the bank or insurance company must escheat inactive accounts, but that ERISA plans are not governed by state law, and ERISA has no escheat provision. On the other hand if the state says you can do it, maybe it's not too much of a risk. (Probably a good legal issue and you should treat it as such.)