Outstanding Pension Checks

[jaxon1225]

Thanks in advance for your thoughts.

Our pension plan custodian provides a quarterly outstanding check list to us to keep our plan clean. We were notified by the custodian with the past report that they realized that over the years they switched computer systems and the outstanding checks on the prior computer system were never reported to us. Reviewing this current report, there are outstanding checks that are anywhere from 6 years old to 13 years old. Many of these are outstanding monthly annuity amounts. To further complicate the issue, many of the payees are now deceased.

Obviously, we will attempt to contact the payee's family if we can locate the individual that originally called to report their death so that the payment can be made to the Estate.

Our main concern is from a fiduciary standpoint. Does interest need to be paid on these outstanding amounts? Are we liable for anything since the checks sat for so long with no attempts to locate the payee?

Thanks again for your thoughts.

[mbozek]

I don't know of any obligation to pay interest on a pension distribution that is not cashed by the participant. It is likely that many of the checks were sent after death or the participant had moved and either left no forwarding address or the time for forwarding had expired.

There may still be a problem if the check is paid to the participant/estate of the deceased and there is no personal representative who is legally authorized to cash the check in which case you may want to make the check payable to nearest beneficiary defined in the plan and get a hold harmless agreement.

AS for the outstanding payments of periodic benefits you need to determine the date of death so that the plan does not overpay back benefits.

Plan is not liable for failure to pay benefits if participants did not notify plan of a change in address. Plans do not have to spend assets to find lost participants. Usually participants will notify plan if a check is not received. Plans should have disclaimer in SPD advising participant to notify plan admin of change in address.

To identify deceased participants see if plan can get access to SS database of deceased SS beneficiaries.

[david rigby]

Good comments.

Don't forget to check the payment form elected by the retiree: if it was a joint-and-survivor, the plan may need to pay the spouse if spouse survived the retiree.

[jaxon1225]

Yes, unfortunately, most payments were Straight Life Annuity payments and they were made prior to the retiree passing away. So it would be due to an Estate. Thank you.