Missing Beneficiary of Deceased Participant

[chris]

PSP holding approx. 130,000.00 due to deceased participant's two beneficiaries. One of the beneficiaries cannot be located. Plan doc. is a pre-approved volume submitter doc. that provides that after registered mail and "further diligent effort to ascertain the whereabouts of the participant or beneficiary" the amount to be distributed "shall" be treated as a forfeiture. Plan provision goes on to state that if participant or beneficiary is later located, then Plan shall restore the benefit first from forfeitures and second from an additional employer contribution "if necessary". Also, provision states that any benefit lost because of escheat under applicable state law is not treated as a forfeiture under the plan provision or as an impermissible forfeiture under the Code.....

Would sure be nice to treat it as a forfeiture, but would hate to have to restore $65,000.00 at some later date. I guess Plan and Employer could take position that based on its/their diligent effort prior to forfeiture, it is not necessary to restore the benefit......????? Anyone dealt with this befoe or have some words of wisdom? Thanks.

[mbozek]

IRS regulations require that any benefit that is forfeited due to the inability to locate a recipient must be restored if a claim is made at a later date. Escheat is not applicable to ERISA plans because state laws on escheat are preempted by ERISA. A similar question is posted on the retirement plan termination board.

[chris]

Thanks mbozek. What is the cite for the Reg.? Looks like a forfeiture will take place since the plan language makes it mandatory assuming beneficiary does not turn up after sufficient "further diligent effort". I guess the Employer/Plan would just need to carry that as a contingent liability which may materialize in the future...??? I read your posts in the thread in the Termination Forum. Are you aware of any suits against a Plan/Employer in a lost participant situation where the Plan wasn't already terminated? Thanks.

[chris]

Mbozek, I found the Reg. Still looking at the caselaw (if any). Thanks.

[No Name]

Here comes a cavalier suggestion certain to cause an uproar. How about opening up a new Company account (ABC Forfeiture on account of Joe(sefine) Blow), transfer in your $65k. Taxes on interest paid from this account. Money is out of the plan.

[Guest b2kates]

chris, you do not detail what constitutes further diligent effort.

do you have benefticiary's SSN and have your tried IRS procedure to contact.

Have you attempted to use post office forwarding to locate?

[chris]

The quoted "further diligent effort" language in my original post is the language in the Plan document. As far as I know, other than talking to missing beneficiary's brother, the Plan has not undertaken any further steps to ascertain his whereabouts. Clearly, under the Plan terms the Plan should send a letter certified mail return receipt to the missing ben's last known address. Also, I would advise Plan to do an online search (costs only .25 per search) to try to locate. Lastly, I would advise the Plan to use the IRS Letter Forwarding Service. I have used that in the past with good success. Also, I know that family members adopted minor child of missing ben. b/c missing ben. left child with family members at the mom's funeral and he and his wife never came back. Those same family members later adopted the mnor child. I would advise checking the court papers for that adoption to pull address information from that. I guess what constitutes "further diligent effort" remains to be seen............. Matbe Plan could hire a private investigator and pull that fee from the missing ben's 65000.......????