Missing participant with fake Social Security Number

We are trying to terminate a plan but we have a participant who worked a long time ago for the company and provided a fake social security number. The amount of the benefit is small however do we set up an automatic rollover IRA with the fake social security number or do we forfeit the benefit?

I think you need to hold the benefit until a valid SSN or TIN is provided.  This also needs to be reported to the correct authorities- SSA's Office of the Inspector General.  This is from a previous post asking the same question:

ratherbereading, thank you for this vote of confidence.

Even if the April 2023 discussion was about similar facts and circumstances, I didn’t suggest a particular conclusion, but rather that the plan’s administrator might want its lawyer’s advice.

While I suggest that a person not alter, discard, or conceal records, that does not by itself suggest there is a duty to report a crime or other violation.

Consider that, for a situation that involves matters beyond Federal tax law, evidence law might privilege lawyer-client confidential communications, but does not privilege communications with another kind of practitioner.

Consider how a retirement plan’s administrator would identify that a potential distributee now is the same person as the one who earned the benefit. Beyond the false identification number, there might have been other false identifiers.

This is not advice to anyone.

Unfortunately, with all the deportations (whether legitimate or not) this is likely to be not such a rare occurrence in our world.

After the Immigration Reform and Control Act of 1986, the problem of employments processed with false identifiers and resulting retirement plan accounts has persisted.

This difficulty might be something for a SPARK working group to sort out.

Perhaps you can escheat it to the State.  Generally, state escheat laws are preempted but the DOL has a temporary enforcement policy that allows escheatment of $1,000 or less provided the plan fiduciary follows specific guidelines, including conducting a good-faith search for the participant.  See https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2025-01.  Many State unclaimed funds do not require a Social Security Number.  Ask your lawyer....also might need to amend your termination amendment.

If this is a qualified plan covered by PBGC...you cannot roll over to an IRA! If the plan is terminating, all missing participants need to be reported and the benefit sent to the PBGC Missing Participant Program. 

22 minutes ago, TheBoxMan said:

If this is a qualified plan covered by PBGC...you cannot roll over to an IRA! If the plan is terminating, all missing participants need to be reported, and the benefit sent to the PBGC Missing Participant Program. 

Sort of.  The original post stated, "trying to terminate".  If this means the plan has been amended to terminate, and the processing is ongoing, then the statement in the box is (at least approximately) correct.  However, if the "trying to terminate" phrase means something like "planning a termination", then the plan can certainly investigate any missing participant and distribute according to plan provisions, as long as there is not a resolution and/or amendment to terminate the plan.

EBSA’s bulletin states only that the Labor department “will not pursue [a] violation[]” under the conditions the FAB describes. That nonenforcement policy does not excuse a fiduciary’s breach.

If a retirement plan’s administrator has already found that the participant’s purported identifying number is false—and might suspect that the purported or ostensible name also is false, how would an administrator meet all five conditions (including having conducted a prudent search for the missing or nonresponsive participant)?

How would a fiduciary have conducted a prudent search for someone whose identity is unknown?

Even if the applicable State’s abandoned-property regime (to be chosen following the participant’s “last known address”) meets all nine conditions for an “eligible state fund”, how would a fiduciary using the experienced “care, skill, prudence, and diligence” ERISA § 404(a) requires form a finding that the abandoned-property regime “is a prudent destination for the participant’s or beneficiary’s retirement benefit payments”? (I’m not saying a fiduciary could not reason through to the finding, only that the reasoning might not be obvious.)

I don’t suggest that anyone ask the Labor department for guidance. And I don’t suggest asking anything of Congress or of any executive agency.

49 minutes ago, david rigby said:

Sort of.  The original post stated, "trying to terminate".  If this means the plan has been amended to terminate, and the processing is ongoing, then the statement in the box is (at least approximately) correct.  However, if the "trying to terminate" phrase means something like "planning a termination", then the plan can certainly investigate any missing participant and distribute according to plan provisions, as long as there is not a resolution and/or amendment to terminate the plan.

Yes, I can see some wiggle room there if there is no amendment to terminate. I would recommend caution if this is not something the plan does as part of their normal plan administration. If the plan does a small sum cash out every year and this participant didn't get cashed out because of the SSN issue, then I would say the plan could proceed with the IRA if that is part of the plan document. However, if the plan does not cash out small sums every year and decides during the "trying to terminate" time to investigate and make distributions to this population, PBGC will likely consider any distributions made during this time as an attempt to avoid PBGC plan termination regulations and all of these distribution will be subject to PBGC audit. 

Thank you all for the comments. This is a Defined Benefit Plan subject to PBGC coverage. We have tried to find this participant with no luck. They have not terminated the plan yet but I was wondering what to do when they do. I guess we would pay the benefit to the PBGC at that time.

1 hour ago, pixiebear said:

We have tried to find this participant with no luck.

Is there a possibility the participant has "returned to his/her home country"?  You won't know unless you ask other employees, former neighbors, etc.  In my pre-retirement life, whenever we got this response, we made the assumption (use your own judgment) that the EE will never return to employer location and therefore we treated it as a participant-elected permanent forfeiture.  With lots of documentation of course.

Another help for you might be some prior discussion threads.  Try the Search feature, with the phrase "missing participant" or "home country".

The PBGC will not take the money if you know you have a bad SS# and a false name.  At least they would not take it when we were handling a DC termination.  ICE had removed the employee some 10 years before and no one got his real name as he was being hauled off.  No one remembers what he looked like.  Dear DOL, give us a rule that works in reality.