Missing marital status

[Trisports]

Traditional DB plan, several participants were supposed to be put in pay status at age 65 but the prior record-keeper failed to initiate the payments. We are now calculating retroactive annuity payments; however, the plan does not know the participant's marital status. Some participants cannot be located and some won't respond.

On what basis should we calculate the annuity if we don't know their marital status? Single? Married? If married, what age should we use for spouse?

The plan document is silent and I cannot find any guidance on whether there is a default method to use when calculating the annuity.

Thank you.

 

[Effen]

IMHO, and many may argue with me, these are my comments:

1) it isn't the "prior record-keeper" fault.  I know we like the blame the prior service provider, but most DB service providers don't have authority to commence payments.  The PA is responsible for making sure people get paid.

2) Not commencing annuities at NRA is a "no harm, no foul" problem.  Many good ERISA attorney's feel if the participant doesn't request payment, the plan isn't required to pay them until MRD.  (Plan provisions can impact this.)

3) Obviously you can't pay someone you can't find.  If you have a SSN, there is really no excuse for not finding someone. 

4) If the participant is non-responsive, not much you can do until MRD. 

5) At MRD still not much you can do if they are not responsive, but you need to be able to demonstrate that you tried.  Some attorneys I work with favor mailing checks to the known address.  Quick internet search can give you spouses age, do the best you can to calc the QPSA, send them a check, not your problem if they don't cash it.  That said, in my experience, typically a non-responsive participant just doesn't get paid.  The excise tax for failing to take MRDs is on the participant.  As long as PA demonstrates they tried, it should not lead to any additional problems.  However, things can get worse if they die and leave a spouse, because now you still owe the QPSA to the survivor.

6) Lots of big plans have lots of old missing TVs in them.  Do you best to clean them up, but sometimes you can't do anything.  DOL has been active in this area checking administrative procedures, so make sure the client is actively trying to get them paid.

7) Check plan provisions.  Does the plan call for retro active payments, or are actuarial increases acceptable?  Work with ERISA attorney for guidance. Don't make a legal call for your client.

8) The Plan Sponsor needs to drive the boat on this.  You can give them your recommendations, but they need to make the decisions. 

9) If the amounts are less than $5,000, consider forced IRA rollovers.

[david rigby]

Ding, ding, ding.  As usual, Effen gives good advice.

However, #3 might need some "broadening".  I've seen many (!) examples where the a VT participant (with a valid SSN) was identified as "having returned to his/her home country, but no known address".    In that case , see #4.