Lost Participants and Reasonable Efforts

[Guest andmik]

Hello:

I have a dilemma and have searched the posts for something directly on point. A plan has a large number of terminated "missing" participants with small balances (<$5000), a large majority of those being under $100.

The issue is that there are many with bad addresses and have failed to keep the plan updated as to new addresses. The plan is trying to come to grips with what 'reasonable efforts" truly means with regard to trying to locate these participants before forfeiting their accounts under the provision of the Plan Document that affords this process.

We have seen references that support that only a search that includes either the IRS Letter Forwarding Program or SSA program will consitute "reasonable efforts".

The problem with this is not only cost but the fact that the IRS program does confirm whether Participants actually received the packet to act upon, and even if they did, and no contact is made by Participant, Plan still does not know a good address to cash out the small balance.

Does anyone have a comfort level that the use of a commercial locator program can satisfy the reasonable efforts test, before forfeiting account balances without using IRS Progam (with the understanding that balances are required to be reinstated if Participant steps forward)?

Thanks for any feedback in this regard.

Andmik

[stephen]

try Accurint.com

A client of ours has had great success with this site.

The first use is free and subsequent uses are 25 cents per search.

[Guest andmik]

Stephen - Thanks for the feedback. It is greatly appreciated.

One follow up. Do your clients view this type of commercial search a "reasonable effort" and if they do not locate them then they move forward with the forfeiture under the lost/missing participants section of a plan document?

Or do they then determine it necessary under that standard to run the search through the IRS Program?

Thanks,

andmik

[Earl]

My approved document says:

Attempt to Locate. The Plan Administrator will use one or more of the following methods to attempt to locate a lost Participant: (1) provide a distribution notice to the lost Participant at his/her last known address by certified or registered mail; (2) use of the IRS letter forwarding program under Rev. Proc. 94-22; (3) use of a commercial locator service, the internet or other general search method; or (4) use of the Social Security Administration search program.

I figure doing 1 and 2 is more than one and the IRS said ok to one or more.

[Guest andmik]

Earl:

Thank you. The Plan Document the client uses does not even indicate a number but just outlines reasonable efforts, whereby the "Committee" establishes the parameters.

Given the success and definitiveness of a commercial search such as TransUnion etc. (either you find a new address or not, and if you do you send a letter to participant to act on his account), it seems that these types of searches can be, and are deemed reasonable.

As I pointed out everything I read on the IRS Program has mixed reviews on its success as well as the frustration that the company really never knows whether the letter was forwarded since IRS does not provide feedback beyond "we received your request for forwarding".

Thanks again,

andmik

[RCK]

We have had good experience with the IRS program, and we have had horrible experience with it. Depends on the office they go to, how busy they are, and who gets the project. One batch that we sent was not forwarded for over 6 months.

So how long have you been using Automatic Enrollment? Your description of a large number of lost participants with small accounts is what happened to us after we went to auto enrollment.

RCK