Missing Participants - PS plan terming w/ DB plan

[mwyatt]

We have a client who sponsors a defined benefit plan subject to PBGC coverage and a profit sharing plan. There are three participants common to both plans who have left and are nowhere to be found (presumably out of the country). The DB plan is OK as payment can be made to the PBGC using the Missing Participants program. PS plan is a little more problematic.

One idea brought up in a brainstorming session was to deem that their PS balances are deemed to be "rolled over" to the DB plan and then paid to the PBGC. This allows total distribution from the PS plan and presumably allows for these participants to have a better chance to actually see their monies somewhere down the road. Any comments?

[david rigby]

Minor clarification. Are you stating that both plans are terminating? The PBGC will take "missing participants" only if the DB plan is terminating.

BTW, I'm not sure about the answer to your question, but I doubt that the PBGC would look favorably on it. There is a proposed IRS reg that permits a DC plan to set up an IRA for missing participants under certain circumstances.

http://www.benefitslink.com/IRS/revrul2000-36.shtml

[mwyatt]

Both plans are terminating due to retirement of owner (and sale of assets of company - small plan). 3 participants who are missing are somewhere in Central/South America; chances of location are slim to none. Just trying to find an answer to paying out nominal balances from profit sharing plan; the old reply of setting up account with a bank (with eventual reversion to the state) seems grossly unfair in light of $10/month bank fees (plus practicality of setting up accounts for people who aren't actually signing account establishment documents).

What are other people doing in this situation?

[david rigby]

I just reviewed a DB document that included the following steps:

- company will attempt to locate "missing" participants,

- after 5 years from date payment is due, send a registered letter to last known address,

- 3 months after letter, if no response, the Committee may "cancel" the benefits,

- if the participant later shows up, the benefits will be paid.

[mbozek]

you have three options for distributing PS benefits ( DB benefits are transferred to PBGC in accordance with IRC provisions)

1. attempt to contact missing part by sending notice through SS admin

2. make 100% distibution to IRS as income tax withholding

3. treat their accounts as a forfeiture and distribute it among remaining participants (plan should be amended for this option).MP may have a claim against er if they later resurface -- but I dont know if sucessor would have any liability since it did not maintain plan.