Can't locate former 401(k) plan participants--what's the next step?

[Guest pstowers]

I'm new on this site...I've looked around; I found the 6/22/99 you site--don't see anything constructive in actual actions taken. What have other people actually done? Cut a check and put it in a desk drawer?

[Guest pstowers]

I have several former plan participants who I have not been able to locate. Have already tried IRS and Soc.Sec. What is next step? For instance, can I send their account balances to the State(VA)? Do I have to set up some kind of bank account?(I tried that several years ago when I had a pension plan termination and could not get a bank willing to set up individual accounts for participants.) Has anyone done this? Please help!

[Guest GregSelf]

Check the "Retirement Plan Loans and Distributions" topic. There have been numerous discussions on this issue.

[Guest Bob Collins]

If the retirement plan is subject to Title I of ERISA (most qualified plan are) missing participants' account balances cannot be paid to the state as lost funds - DOL statement. Generally the accounts must be maintained by the plan until the participant or a beneficiary claim the money. In IRS Reg 1.411(a)-4 there is a tricky rule about forfeiting the value.

[Guest klc]

Has anyone else tried the IRS Letter Forwarding Program? I used it recently for approx. 50 participants and have a great response. I sent a letter to the program:

IRS Ohio District

Disclosure Officer

Room 7019

P.O. Box 1818

Cincinnati, OH 45201

They try to match the participant SS# to their files and forward the letter. Your letter needs to have information so the participant can contact you. IRS will not give you their address directly.

[Guest]

If IRS and Social Security approach does not work, there are commercial locator services. I know of one that specializes in serving qualified plans. The costs are not unreasonable.

If these above methods do not work, I have heard about another interesting approach to this problem. To my knowledge, this method has not undergone IRS or DOL scrutiny. But here it is. Assuming cash distribution is a viable distirbution method, distribute all of the participant's benefit. Then withhold 100% for federal taxes on behalf of the lost participant. Send a 1099-R to the last known address of the participant and remit the proceeds to the IRS. The IRS gets it's tax revenue and plan has distributed the participant's benefit. I would only use this method after exhausting all others. I would also be interested to know the result if this approach does receive scrutiny from IRS or DOL.

[LCARUSI]

With regard to Dan's proposed method:

1) I assume you wouldn't do this if the acct balance were over $5,000 (unless the participant is past normal retirement age). I see no justification for cashing out such a person without consent.

2) Even if the person is under $5,000 and subject to cashout, the withholding rules are quite specific, at least with respect to an eligible rollover distribution. And presumably this would be an eligible rollover distribution. The rules say withhold 20%. How can the sponsor arbitrarily withhold 100%?

[Wessex]

I agree with LCarusi. I have recently seen this and other unauthorized approaches taken in proposed language for a major provider's GUST prototype restatement. I understand that this language has been submitted to the IRS. Given the sorry state of many prototypes (not the particular one I am referring to), I would not want to rely on this language as being covered by the opinion letter unless I was satisfied that the determination letter application explicitly pointed out this feature. Even then, IRS approval probably would take care of qualification issues, but not necessarily ERISA issues.

[rocknrolls2]

Another option is to use the internet. I just read an article that lists web sites for locating lost participants. There are 2 free sites listed: (http://www.vitalrec.com) and (http://www.tollfree.att.net/tf.html) and a site for which a fee is charged (http://www.1-800USSearch.com). Hope this helps.

[Medusa]

Wessex, did the "major provider" ever get approval on that language? One of our individually designed plans wants to include language like that, and I am curious as to its likelihood of flying.