Missing Participant payouts - DOL FAB 2025-01

[Belgarath]

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2025-01

Now maybe it is just me, but how is this preferable to using, for example, Penchecks, or Millenium Trust, or whoever? Seems MORE difficult to me, but maybe I'm missing something.

[Paul I]

The following article talks about the IRS tax-related issues in the event of escheatment of a benefit.

https://www.groom.com/wp-content/uploads/2022/12/IRS-Version-of-Missing-Participant-Guidance.pdf

The IRS presented how the escheated benefit would be reported for tax purposes, which adds another layer of complexity to this approach.

It is hard to assess the value of the DOL's temporary enforcement policy. 

Sometimes it feels like we would all be better off if the agencies would stop coming up with creative ideas on how to "help".

[RatherBeGolfing]

1 hour ago, Belgarath said:

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2025-01

Now maybe it is just me, but how is this preferable to using, for example, Penchecks, or Millenium Trust, or whoever? Seems MORE difficult to me, but maybe I'm missing something.

The benefit is largely to the consumer/participant/beneficiary.  Do I have assets in a former employer's plan? 

This is the first sentence on the DOL's website:

Quote

 

EBSA is helping America's workers and beneficiaries search for retirement plans that may still owe them benefits by establishing a public Retirement Savings Lost and Found Database through the SECURE 2.0 Act of 2022. 

 

 

[Peter Gulia]

Just curious, if a retirement plan uses the default-IRA provider the recordkeeper suggests, will that provider accept default rollovers for amounts less than $1,000?

If so, is there any lower amount a default-IRA provider would not accept?

[RatherBeGolfing]

59 minutes ago, Peter Gulia said:

Just curious, if a retirement plan uses the default-IRA provider the recordkeeper suggests, will that provider accept default rollovers for amounts less than $1,000?

If so, is there any lower amount a default-IRA provider would not accept?

We roll all forceouts. From $7,000 down to any amount that is in excess of distribution fees.  I havent had it happen, but in theory that could be $1 after fees.

[Peter Gulia]

While I recognize EBSA’s observation that fees might be more than investment gains or interest credited and so consume meaningful portions of a default-rollover IRA, some might wonder whether it’s prudent or appropriate to cause a participant to receive income and so (in some circumstances) incur Federal, State, and local income taxes, rather than get a continuing deferral of income for one or more tax purposes.

The factors to consider might be somewhat different if a participant’s whole accrued benefit is no more than $1,000 and an amount that might be sent to a State’s abandoned-property administration is not rollover-eligible because it is a § 401(a)(9) minimum distribution.

[Mike McWherter]

FAB 2025-01 has 13 requirements to be met in order to escheat a participant's "small balance" account to a state unclaimed property fund - conditions 1 thru 4 and then #5 which has 9 more sub-conditions. They include but are not limited to updating the plan document to permit this if the plan doc doesn't already allow it, updating the SPD accordingly, documenting that escheatment is the prudent thing to do with that participant's account, and also documenting that the 9 sub-conditions under condition #5 are met by that state's unclaimed property program. Keeping in mind all 50 states, Wash DC and Puerta Rico have unclaimed property programs. Sounds like a lot of work for accounts $1K or less. As mentioned above, PenChecks and I assume some other providers will establish automatic rollover IRAs (404a-2) for any amount in excess of the distribution fee to $7K.