Private Search Fees deducted from participant account?

[Dennis Povloski]

Normally when we process a distribution, we charge a processing fee directly to the participant's account. The plan sponsor has a number of terminees who's whereabouts are unknown. If we use some sort of locator service, can we deduct those fees from the participant's account as well?

[mbozek]

Normally when we process a distribution, we charge a processing fee directly to the participant's account. The plan sponsor has a number of terminees who's whereabouts are unknown. If we use some sort of locator service, can we deduct those fees from the participant's account as well?

I would say no because the only fees for individual services i have seen are those resulting from an additional service requested by the pareticipant such as a QDRO, or plan loan or the cost of wiring a distribution when a check is available.

Q Why not use a free locator service such as the IRS or forfeit benefits if the participant does not reply to an IRS letter?

One thing to remember- when a partaicipant applies for SS benefits SS notifies that person of any amounts held in a qualified plan. If the plan forfeits benefits at 70 1/2 if the participant cannot be found it is highly unlikely that the participant will be alive to collect it.

[BG5150]

Q Why not use a free locator service such as the IRS or forfeit benefits if the participant does not reply to an IRS letter?

Doesn't the IRS have a minimum number of letters that need to be sent? Like 50? Or 75?

Plus, you never know if the letter got to the intended person or not. You are not appraised to undeliverable pieces. Not are you appraised of what address they have for the people.

[mbozek]

Q Why not use a free locator service such as the IRS or forfeit benefits if the participant does not reply to an IRS letter?

Doesn't the IRS have a minimum number of letters that need to be sent? Like 50? Or 75?

Plus, you never know if the letter got to the intended person or not. You are not appraised to undeliverable pieces. Not are you appraised of what address they have for the people.

I thought it was free if there were a minimum # of requests.

As for not knowing if pieces are undeliverdable or got there, who cares. If participant is 69 and doesnt reply its because he/ she is dead or has changed identity and doesnt want to be found. Since 75% of SS retirees commence benefits at 62 and are notified of existance of benefits held at a Qualified plan at thattime its not likely that employee will contact employer at 69 to collect benefits so plan should forfeit benefits before MRD is required at 70 1/2.

[Kevin C]

The IRS letter forwarding program is free as long as you don't make more than 49 requests in a 12 month period.

http://www.irs.gov/retirement/article/0,,id=110139,00.html

For 50 or more, they charge a fee.

http://www.irs.gov/retirement/article/0,,id=110142,00.html

[Bird]

If we use some sort of locator service, can we deduct those fees from the participant's account as well?

Perhaps yes, if it was anticipated and disclosed in the SPD. Now that the person is lost, revising the SPD doesn't do any good because they won't get the notice.

Using the IRS search service is very slow and results are spotty at best - and it probably takes us more in time value, whether billable or not, vs. getting a quick and usually better response from a search service for a relatively low fee. And I would not forfeit accounts so casually, fwiw.