Missing Participant

[Guest JBauer]

I posted this question as a response in a different thread, but believe it will receive more attention as a separate topic.

A client is having trouble finding a bank or insurance company that will set up a deferred annuity for a missing participant in a MPP.

I have to believe this comes up frequently. Does anyone have any recommended annuity providers?

[Guest mjb]

I posted this question as a response in a different thread, but believe it will receive more attention as a separate topic.

A client is having trouble finding a bank or insurance company that will set up a deferred annuity for a missing participant in a MPP.

I have to believe this comes up frequently. Does anyone have any recommended annuity providers?

Under the USA patriot act financial companies are required to ask for proof of identity by the applicant which usually requires submission of a signed application, drivers license and w-9. How do you avoid this requirement?

[Guest JBauer]

Thanks. I left out that detail. IRS addressed this in its winter 07 newsletter - see page 18 - http://www.irs.gov/pub/irs-tege/win07.pdf. DOL 2004-02 also incldues a comment, too. Note these appear in context of direct rollovers, and I can't think of any reason for this not applying to annuities.

[david rigby]

How about an immediate annuity? Insurance companies are usually glad to sell them.

[Guest JBauer]

Appreciate the suggestion, but can't do that because PP has not reached NRA.

[david rigby]

Appreciate the suggestion, but can't do that because PP has not reached NRA.

So what? The Plan is terminating, and should not be held hostage to a missing participant.

BTW, be sure you have done all you can to verify whether the participant is still alive.

[Guest JBauer]

Yes, have sent certified mail, asked former colleagues, use IRS letter forwarding service, e-mail, etc. Ins. cos won't issue an annuity without participant's signature. However, the administrator has not yet inquired about purchasing an irrevocable commitment to issue an annuity.

[Guest mjb]

If the participant is missing and cannot be located why are you trying to purchase an annuity for someone who is unlikely to ever return to claim the benefit? First thing is to use a professonal locator service to find the participant. If this is unsuccessful why not forfeit his accrued benefit and allocate it among the other participants? Even if permitted under state law, purchasing an annuity for a missing particpant who is unaware of its existance will only result in the funds escheating to the state in which the contract was issued after a period of not more than 6 years.

Its an interesting statistic but most people who are "missing" do not want to be found and will go to extreme measures including changing their identity to prevent being found.

[david rigby]

Its an interesting statistic but most people who are "missing" do not want to be found and will go to extreme measures including changing their identity to prevent being found.

"Most" is usually not considered a statistic. Can you share what evidence you have to support this claim? Thanks.

[WDIK]

Can you share what evidence you have to support this claim?

Isn't that why so many board members post under pseudonyms?

[jpod]

Will the employer/plan sponsor (or the successor to the employer/plan sponsor if this is happening in connection with a merger or acquisition) continue to maintain another tax-qualified defined contribution plan? If so, consider transfering the missing participant's account balance to that plan (retaining the J&S and optional forms of benefits required to be preserved). I'm not saying it is a perfect solution, but it buys time and may be a better choice than forfeiting or purchasing an annuity.

[Guest JBauer]

jpod - nope, employer is discontinuing operations altogether. But I believe that if it was not, transferring to a replacement DC plan would be permitted, provided that the money purchase (and other plan) attributes followed the benefits.

[JanetM]

Forfeit the balance, allocte to others and move on.

[Guest mjb]

Its an interesting statistic but most people who are "missing" do not want to be found and will go to extreme measures including changing their identity to prevent being found.

"Most" is usually not considered a statistic. Can you share what evidence you have to support this claim? Thanks.

If you google "why missing persons disappear" you will find an article in the Gazette (Colorado Springs) on 7/15/01 by Anslee Willett on the Chandra Levy disapearance which will answer your question.

[Belgarath]

Question: is this plan termination being filed with the IRS? If yes, will they ALLOW you to treat this as a forfeiture?

[Guest JBauer]

No, a 5310 will not be filed. And no, plan doesn't allow balances to be forfeited on account of missing status on termination. And would rather have a possiblity of the missing NHCE eventually getting balance rather than reallocating to the other two participants, both of whom are HCEs and one of whom is the fiduciary.

[Guest mjb]

now that you have no options what are you going to do?