Missing Participants - Statement Requirements

[LANDO]

One of our clients is a large multi-employer profit sharing plan. Participants come and go all the time in this plan, but many times simply drop off the radar screen indefinitely. My questions are,

• Does the plan have to continue to attempt to deliver statements every quarter even though statements have come back as undeliverable for many many quarters?
• Is there some obligation to use a locator service to try and get a valid mailing address?

This would be with respect to participants that are not subject to force out distributions.

[Lou S.]

I believe you are obligated to try to locate them when you are forcing them out. I am not aware of being obligate to track them down if they don't give you a forwarding address.

Obviously if you can find them cheaply best practices would imply doing so but there is a cost benefit issue to deal with, namely who pays for locating them? And it's not just statements you need to worry about there are a host of other items required to be sent to participants like fee disclosure, SMM and SPDs, SAR, etc...

[LANDO]

Yea, those are good points Lou. Thanks for sharing your thoughts.

[Peter Gulia]

Does the plan provide trustee-directed investment or participant-directed investment?

If it's participant-directed, how confident are you that the plan's fiduciaries could prove all conditions needed to support an ERISA section 404© defense?

Would the fiduciaries' position be weakened by a participant's allegation that, for many quarters, she had not received statements, and that the plan's administrator had actual knowledge of non-deliveries?

[LANDO]

It's participant directed, and I get your point Peter. Thanks.

[My 2 cents]

It would probably be best practice if a good faith effort was made to find the participant the first time it was realized that the old address was no good. It doesn't usually get easier to find them if one chooses to wait until benefits are due to be paid.

Whatever statements have to be routinely delivered (quarterly account information and Summary Annual Reports for a defined contribution plan, annual funding notices for a defined benefit plan), things will just go that much more smoothly if one actively tries to keep track of where all of the plan participants are.