SSA locates missing participant

[CLE401kGuy]

Profit Sharing plan terminated in the 80's - Form SSA filed at the time indicated a benefit for a participant who went missing - the plan later terminated.... during the course of the termination IRS permitted the balance to revert to the employer (or so it is believed) - Now because of SSA sending the participant of notice of a possible benefit, the participant is making his claim for the benefit - can someone point me in the direction of the rules to go about paying this participant - I've tried searching in the ERISA Outline Book, but am only coming up with info on what do when someone goes missing as opposed to restoring their benefit - is interest applied to the benefit in the case of a terminated plan or are there outlined steps of how to proceed... just not able to put my fingers on it - any help would be appreciated, thanks

[Jim Chad]

Would a service online be able to get you a copy of the 5500 Schedule SSA that would tell the amount he is due?

[ESOP Guy]

I don't think I have ever seen a PS reversion to the employer. More likely was the balance was treated as a forfeiture. You need to get a copy of the plan document from the time of the plan termination. it should describe what should have happened to the balance and what happens when the person is found.

Most LIKELY (but can't be sure) is the balance was forfeited at the time. Most LIKELY the balance needs to be restored and paid the person. It seems like earnings is not required in the plan documents I have. If the plan doesn't exist so there aren't current forfeitures to make the restoration from the plan sponsor is going to be on the hook for the account balance due.

But the plan document if it can be found is what is going to cover this. They all have a section on lost participants.

I would make sure the balance was not sent to the state or something like that. That isn't what the documents tend to say but banks do it anyway. Also, make sure the person wasn't paid already and someone just didn't file a D on the SSA. D's weren't mandatory for many years so people got lazy and didn't file them. Now that laziness is coming back to bite people.

[BG5150]

Would the ER have to open up an account in the trust's ID? My guess is they'll have to get a new one, as the old one was put out to pasture and/or recycled.

[CLE401kGuy]

Update on this topic.... The client has agreed to pay out the participant, the participant is someone the employer remembers - we all agree that the dollars were returned to the employer as part of the termination process as directed by the IRS... The previous answer regarding opening an account in the name of the plan sheds some light on the direction we most likely should take next.... What should be the name on the account that payment is made to the participant - open an account in the name of the plan officially, provide distribution election forms (including options to take lump sum, rollover) and then payout the individual and 1099 him in January? is there specific direction in the code that outlines process... since the IRS gave direction on what to do - it appears that the code itself may not give me the exact answer, but perhaps there is other language out there that I can apply to this situation - again, any thoughts are welcome....

[david rigby]

Altough it was on the form SSA, that does not eliminate the possibility that the benefit was paid out (correctly) in a later year.

[My 2 cents]

In prior years, reporting people who were paid out on the SSA was not mandatory. If we only had known all the trouble that reporting them as D's would save in the future!

[masteff]

Update on this topic.... The client has agreed to pay out the participant, the participant is someone the employer remembers - we all agree that the dollars were returned to the employer as part of the termination process as directed by the IRS... The previous answer regarding opening an account in the name of the plan sheds some light on the direction we most likely should take next.... What should be the name on the account that payment is made to the participant - open an account in the name of the plan officially, provide distribution election forms (including options to take lump sum, rollover) and then payout the individual and 1099 him in January? is there specific direction in the code that outlines process... since the IRS gave direction on what to do - it appears that the code itself may not give me the exact answer, but perhaps there is other language out there that I can apply to this situation - again, any thoughts are welcome....

I really think it's worth a call to the DOL and/or IRS (I'd start w/ EBSA since it's terminated). The plan was terminated in the 80's; the excess reverted to the employer... IMO, the money lost all qualified nature at reversion. I see it as a payment from the employer's general funds. I'm thinking 1099-MISC, no election forms, etc.

Just seems like a can of worms to try to claim in any way that it's a distribution from the plan. Wouldn't it be like the IRS to ask for the last 30 years worth of 5500's and plan amendments?

[austin3515]

I don't see how this would not be considered an eligible rollover distribution. Talk about sticking it to the Participant if it was not eligible for rollover. If it was me, I would just do the 1099-R on the employer's ein and call it a day. I guess I might feel differently if this was a "large" distribution. But if we're talking about $5,000 I would not go crazy with this.