Deceased Participant with no identifiable beneficiaries / estate

[JButtrick]

A client has a participant who died and has no information regarding beneficiaries, family members or the executor of his estate.

They are approaching the 5 year anniversary of the participant's death and want to know:

1) What they should do with the money. Is a missing participant IRA an option?

2) If there is a penalty if they hold on to the money beyond the 5 years.

Can anyone point me in the right direction?

[Lou S.]

Who would put as the IRA owner's name? I don't think that's an option in this case.

I assume they have made every reasonable effort to find beneficiaries?

Does the document allow for forfeiture, with restitution if the the beneficiaries come forward at a later date? Is escheating the to the state and option?

[jpod]

Preliminary follow-up questions:

1. How much money is in the account?

2. Who is default beneficiary under terms of Plan?

3. Was there group life insurance procured through employer? If so to whom was life insurance paid?

[Kevin C]

The participant's obituary may have helpful information. They usually list names of surviving family members and where they live. If you can't find it on-line, some of the genealogy websites include access to archived obituaries. We were able to track down two default beneficiaries last year using information found in obituaries. If you know someone who does genealogy research, they can be a big help in the search.

[JButtrick]

The plan document says spouse, then children, then the estate and that if none can be located, then the distribution should occur in accordance with federal law and regulations, which I understand can be a forfeiture (per the IRS) or Escheat (per the DOL).

The process of trying to locate the beneficiaries is underway.

The former Plan Administrator was not proactive in trying to track people down. Now the plan is up against the 5 years and there is new PA that wants to get it cleaned up, but also wants to know what bad things will happen if the process goes beyond 5 years. Is there an excise tax or is it a plan qualification issue. I guess that is the real question.

[Kevin C]

Failure to pay an RMD is a qualification issue for the plan and results in a 50% excise tax for the beneficiary. If it reaches that point, I would look to EPCRS for the correction.

[mbozek]

Does the plan have a provision that permits forfeiture of vested benefits if participant whose benefits are payable cannot be located provided that benefits are reinstated if participant requests payment at a later date? If not see if a provision can be added.

See if the state abandoned property fund will accept the distribution from the plan. some do, some don't.

Also check the county where the participant lived to see if his will was probated or property distributed. Has the client tried a locator service to find relatives?