Deceased Participant - No Beneficiary, No Estate and Plan is Terminating?

I've seen variations of this question on here, but nothing exactly on point. What does a plan do with the benefit of a deceased former participant when there is no beneficiary, no estate, and the plan is terminating? 

401(k) Plan participant died in 2013 and plan was notified in in 2015. There was no beneficiary on file. According to the plan document, if there is no designated beneficiary, the beneficiary shall be the surviving spouse and if there is no spouse the beneficiary shall be the executor or administrator of the participant's estate. It appears there was no estate established and employer cannot find any heirs. 

The plan will soon be terminating due to a merger. What should be done with this participant's benefit? 

Legally speaking it is my understanding there is always an estate.   They just happen once you die- your stuff enters your estate regardless if there was a plan or not.   A plan just defines better what an estate looks like.

That might not help much if you can't find anyone who can do something with the estate.  

You are most likely going to need the plan lawyer to tell you what to do.  

I would at least start by making sure the plan says document what has done to find an heir.   Try outside of the box thinking.   You would be shocked how many times we made a payment because we found an obituary that named the church the funeral service happened at.  So we called the clergy to ask if they knew how to contract any family members of the deceased.   Most people hold a funeral at church do so at the one they attended regularly so the clergy knows the family.  Most obits name all the surviving family members also.  Most are online.   

You MIGHT be able to defend a forfeiture and reallocation if you can document a very good search but I would want the plan lawyer to make the ruling.   

ESOP Guy is right, there is always an estate for purposes of the deceased's property passing to someone. Every state has provisions for that in its probate code. And ESOP Guy's suggests for sleuthing out who the heirs might be are excellent. I would not suggest reallocating, however. If you can identify the beneficiaries, you can use the missing beneficiary component of the PBGC's missing participant program if you are unable to find them. BTW, you say that the plan was notified of the death in 2015. Who notified of the death? Is there a letter in the file? That might of course provide a clue if there is.

On 9/23/2021 at 3:13 PM, ESOP Guy said:

Legally speaking it is my understanding there is always an estate.   They just happen once you die- your stuff enters your estate regardless if there was a plan or not.   A plan just defines better what an estate looks like.

That might not help much if you can't find anyone who can do something with the estate.  

You are most likely going to need the plan lawyer to tell you what to do.  

I would at least start by making sure the plan says document what has done to find an heir.   Try outside of the box thinking.   You would be shocked how many times we made a payment because we found an obituary that named the church the funeral service happened at.  So we called the clergy to ask if they knew how to contract any family members of the deceased.   Most people hold a funeral at church do so at the one they attended regularly so the clergy knows the family.  Most obits name all the surviving family members also.  Most are online.   

You MIGHT be able to defend a forfeiture and reallocation if you can document a very good search but I would want the plan lawyer to make the ruling.   

We've been known to call the coroner to find out who claimed the body....

In any event, as others has said, there *is* an estate, it's just not being administered.  ANYONE can administer the estate, if approved by the court.  If the amount is big enough, someone can go to probate court, get appointed administrator, take the assets, then under direction of the court, disburse them.  Perhaps charity, or escheatment....

Otherwise, probably the best bet is to forfeit - but if an heir comes forward down the road, pray the statute of limitations has run.

Here's another idea: send the money payable to the estate to the PBGC and let the PBGC deal with it......https://www.pbgc.gov/sites/default/files/form-mp200-instructions.pdf

5 minutes ago, bito'money said:

Here's another idea: send the money payable to the estate to the PBGC and let the PBGC deal with it......https://www.pbgc.gov/sites/default/files/form-mp200-instructions.pdf

 

bito'money, I have not worked through the PBGC's forms/instructions/guidance on this line-by-line, but I think that in order to do that you would have to list the participant as the missing participant/beneficiary, even though he or she is dead. I think if the participant is already dead you are supposed to identify the beneficiaries. But the PBGC obviously does take amounts for living missing participants who eventually die before they are located, so in theory as long as there is no direct question on the form on which you have to represent that your "missing participant" is still alive (and I did not find any), it might work. Note the PBGC does what you to attach documentation regarding default beneficiary provisions of plan and any participant designation, foreseeing the possibility that the participant may be dead before they find him or her. But technically, I think that they anticipate that the participant is alive when you identify him or her. Could be wrong. Maybe others have reviewed this more closely.

Luke, if you perform a diligent search and are unable to determine the beneficiary of a decedent by the time you file the Form MP you would list the benefit under the deceased participant's information.  (For example, let's say you find out the participant died years ago when processing the plan termination, you have no beneficiary designation form on file, and you either can't determine who the participant's survivors were based on the default beneficiary hierarchy in the plan document, or you can't find an individual administering his estate if the benefit is payable to the participant's estate),

The preamble to the 2017 PBGC missing participant regulations under section 4050 stated the following: 

"PBGC expects that there will be instances where a DC plan knows a participant is deceased but has little or no information about a beneficiary. Where an unknown beneficiary of a deceased participant is missing, as defined in the final regulation, the account balance of the deceased participant may be transferred into the missing participants program. PBGC will take into account the fact that there is no known person to search for in evaluating the plan’s fulfillment of the diligent search requirement for any such distributee. Plan fiduciaries and QTAs would file in accordance with the forms and instructions for DC plans what information they have about the participant and beneficiary."

Thanks, bito'money. That's probably the best thing to do, then.