Missing participants who have left the country

[AlbanyConsultant]

I've looked at several similar threads on this, but most are old enough that I wanted to see if there were any new ideas...

4 participants of a plan have returned to Ecuador - a very "in the middle of the night" kind of deal. Three have balances in excess of $5,000, and the other is over $1,000 (which is the plan's new automatic distribution threshold effective 3/27/05), so there's no basis for an immediate distribution anyway.

Can these participants be declared "lost" or "missing"? They have sent certified letters to their last known address (which have all been returned, naturally). They were not in any of the employer's other plans, so there's no information there. Regarding beneficiaries, they either didn't complete it or were each other's beneficiaries, so that's not going to help. And I can't imagine the IRS or SSA letter forwarding service is going to be able to find them - they'll have the 2005 address, and I highly doubt they are going to pay taxes in 2006!

Our plan document (Datair prototype) says that if they don't respond within 3 years of sending a certified letter, "the ultimate disposition of the then undistributed balance of the Distributable Benefit of such Participant or Beneficiary shall be determined in accordance with the then applicable Federal laws, rules, and regulations."

It seems that I just have to tell my client to sit tight until 3 years have passed and then revisit the issue, right? But let's say that three years is now - what would I do with this money?

Thanks.

[Leopurrd]

Our plan document (Datair prototype) says that if they don't respond within 3 years of sending a certified letter, "the ultimate disposition of the then undistributed balance of the Distributable Benefit of such Participant or Beneficiary shall be determined in accordance with the then applicable Federal laws, rules, and regulations."

I've never used the Datair prototype but I can't believe it would be that silent on a lost participant like that. Are you sure there isn't another section of the doc that references these lost participants?

For example, I know the Corbel/PPD documents call for a full forfeiture of the monies (deferrals included) if you can't find the participants in a specified amount of time. You would then keep a listing of those participants who were forfeited and use the forfeitures according to your document (fees/reduce/realloc, etc).

If the participant were to request their monies at a later date, the employer would be obligated to "refund" the forfeitures to the participant. Again, your document should tell you how these monies come from the plan. My experience tells me most docs state forfeitures first, then earnings and additional ER contributions or something thereof.

The only time this usually differs is if the plan is in the process of termination. Then, I don't think you can forfeit the monies, but you can use a rollover IRA or something like that.

Hope this helps. I'm hoping someone with Datair doc experience can chime in as well

[Guest mjb]

Do you really think these people will reappear and ask for their money? and if they do how will they prove their true identity to the satisfaction of the plan admin since they used false ID to establish plan accounts. Are you going to give them the funds upon demand "Hi I opened an account in the name of Joe Blow SS no 000-00-0000, Dob 00-0-00 but I am really Joe schmo with ss no 999-99-9999 dob 99-99-99. How do verify the new identity?

[Belgarath]

This is such a difficult issue. Maybe ASPPA et al can lobby IRS/DOL/PBGC to have all such accounts turned over to the PBGC. This will help the PBGC deficit if the employees never demand the funds, and it takes a difficult legal burden off the Plan Administrator, and puts ID verification in the hands of the PBGC, which is a more appropriate place for it! I don't know if the PBGC regs as directed under PPA will cover this or not. Hopefully yes - has anyone had conversations with folks there to get any feeling for what is planned?

Sorry, this is no help in answering your question, just a bully pulpit for expressing what I'd like to see on these situations.

[bzorc]

How about sending the balances to your state as unclaimed property?

[Guest mjb]

Abandoned property laws are preempted by ERISA. Many states will not take ERISA funds as abandoned property.