Missing Participants

[Guest Sheryl L]

I have a client that has missing participants that have left the US and moved to Mexico. Is it best to use the SSA or IRS? I am aware that participants can be located using the IRS and SSA. Can someone provide the address used and format required when inquiring through the SSA? Thanks!

[david rigby]

If the individuals are in Mexico, the IRS and SSA are going to have the same problem: no data reporting.

[Guest Shelton]

Maybe you could use a private service?

Check these out

http://www.employeelocator.com/

http://tislocators.hypermart.net/tis1.html

[mbozek]

If the participants cannot be located via SS then why not escheat the money to the pbgc for (db plans) or forefeit the money and allocated it among the rest of the participants if it is a dc plan? Why bother with an effort to find peple who have disappeared? If the dc participants later turn up the employer can pay the benefits from current forfeitures or make a contribution to cover the contribution. It is highly unlikely these people will ever turn up.

[david rigby]

I'm not a lawyer, but it is unlikely that "escheat" and "PBGC" belong in the same sentence.

If a current of former employee has questions about how to search for a "lost pension", the PBGC has this booklet, in English or Spanish: http://www.pbgc.gov/publications/lostpendl.htm

This is the PBGC Missing Participant program: http://www.pbgc.gov/plan_admin/xamiss.htm open only to DB plans. There is a proposed IRS reg which permits DC plans to set up IRA's for participants who cannot be located. Not sure if it is a good idea though.

[mbozek]

the most obvious feature of all these missing participant questions is how much effort is expended in trying to locate people who are not findable. If the employees cannot be found through SS there is unlikely that the ee will ever be found. IN a DB plan the benefits can be transferred to the PBGC (which is a form of escheat since it is a government agency- what would u call it?). Setting up an IRA for missing participants is a not a viable option because the IRA custodians require the IRA owner to sign the application and no employer can open an account on the emplyees behalf unless the ee has given a power of attorney. Also-- Most custodians have an annual fee of about $30 a year to maintain the IRA-- who is going to pay for this - the plan sponsor. Finally what will the IRA be invested in ? A mm fund paying about 2.5-3%. If the employee disappears without leaving a forwarding address or requesting the benefits then a dc plan has no obligation to track the participant down other than through ss. Therefore just forfeit the benefits in a dc plan and go on.

[k man]

I know this is an old thread but what happens if we use the IRS locator program, they send the participant a letter but the participant still does not attempt to get the money. the balance is over 5,000.

[Earl]

I have found a couple of mutual fund companies that will open IRAs for lost participants (without the IRA owners signuature). One wants minimum of $5,000 though and most lost people are under that.

Forfeiting is a process I don't advocate as most small employers will not really give much of an effort if they know they will get 70 - 80% if they fail to find a guy.

And what to do with a terminating plan. I have a terminating 401(k) with about 15 people with under $5,000 that have been lost. Who would get a forfeiture?

I think pay as 100% withholding is the only solution. At least the person will get it credited to them.

Personally, I can't wait for the forced IRA rollover process to be solidified.

[k man]

can you email or post the name of the mutual fund companies.

[2muchstress]

Same scenario, different twist.

I have a terminating plan with a lost participant - balance over 5k. The participant's balance is in a self-directed brokerage account. The broker will not re-title the account without the signature of the participant.

Is it possible to treat this distribution as a rollover, even thought the account will still be registered in the plan name?

[mbozek]

2much: I do not understand why it is necessary for the broker to retitle the account. Rollovers require the participant's consent. In order for the plan to terminate, all assets have to be distributed. Why cant the plan make a distribution of the assets without the participants consent in a lump sum as permitted under the 1.411(d)-4 A-2(B)(2)(iv) regs. The plan can withhold 20% of the account balance and the balance of the account can remain in the name of the participant with the broker. The broker does not have the power to hold up the distribution of the plan assets upon termination. You should check the agreement between the plan admin and the brokerage but the agreement should provide that the plan has the right to withhold money in the brokerage account required under the tax law in the event of a distribution. There is another alternative-- forfeit the participant's account and direct that the funds in the brokerage account be returned to the plan for distribution to other participants as permitted under the vesting regs. The agreement should state that the money held in the brokerage account is a plan asset and subject to all the rules of the plan including forfeiture provisions. The assets in the brokerage account are no different than funds held in any permitted investment under the plan.