"[A] variety of reasons [may] lead to a participant's being deemed missing, such as a participant's failing to update contact information after moving, switching phone providers, changing their name due to a marriage or divorce, or passing away with their beneficiaries unaware of their benefits. This article summarizes a plan sponsor's duties regarding missing or unresponsive plan participants and alternative methods for disposition of related plan amounts." MORE >>
"The Portability Services Network LLC reported ... that 20,997 plan sponsors have elected to adopt automatic portability, as of September 30. The number reflects a 1,225-plan (6.2%) increase from the 19,772 plans reported as of June 30. Portability Services Network is a clearinghouse that facilitates the automatic transfer of small 401(k) balances among the six recordkeepers that own the network[.]" MORE >>
"As of July 2025, [the authors] estimate that there are 31.9 million left-behind or forgotten 401(k) accounts holding approximately $2.1 trillion in assets, up almost 30% from mid-2023. The number of forgotten 401(k)s has almost doubled over the last decade driven by ongoing job switching and layoffs ... Layoffs in the Federal Government have led to growth in the number of left-behind Thrift Savings Plan (TSP) accounts, with almost 3 million TSP accounts now projected to be left behind by the end of 2025." MORE >>
"[T]he Unclaimed Retirement Rescue Plan [HR 5325] would direct the [DOL] to issue a regulation that would permit retirement plan fiduciaries to 'transfer unclaimed retirement distributions to state unclaimed property programs.' ... Before transferring the balance, the fiduciary must first try to contact the participant by sending notices, among other requirements. The fiduciary must also report the transfer for the DOL so the data can be used for the Lost and Found database." MORE >>
"[Rev. Rul. 2025-15] does not address how plan sponsors should handle situations such as if: [1] The first check is mailed to an address the plan sponsor may have reason to believe is not current; [2] The reissued check is issued to a different person than the first check (e.g., a surviving spouse); [3] The plan sponsor does not have sufficient records regarding the initial payment; or [4] The reissued check is distributed by an entity other than the issuer of the first check (e.g., the [PBGC's] Missing Participants Program)." MORE >>
"Uncashed checks raise several compliance issues for plan sponsors ... [1] how to handle the withholding that was taken from the check and then what to do when the check is reissued ... [2] how to handle withholding when the participant later resurfaces and requests a replacement check ... [3] the fiduciary duty to find missing participants ... [4] what happens to the earnings on those checks while they remain uncashed? " MORE >>
"Generally, adjustments or refunds of income tax withheld on a retirement plan distribution are not available when the retirement check goes uncashed.... Form 1099-R reporting for a subsequently reissued check is only required when the reissued check is greater than the original check amount and the difference is $10 or more." MORE >>
"Although not discussed in [Rev. Rul. 2025-15], the IRS's holdings are consistent with general constructive receipt principles, under which an individual cannot affect their tax obligations by turning their back on compensation." MORE >>
"While the DOL indicates its growing approval of voluntary transfers to state unclaimed property funds in the preamble to FAB 2025-01, specifically noting that IRAs charge considerable fees that decrease account balances over time while state unclaimed property funds charge no fees and return lost assets to owners with widespread success, the relief offered by FAB 2025‑01 is significantly limited." MORE >>
"Multi-year data from one mega-plan sponsor with over 250,000 participants revealed that around 10.5% of requested distribution checks for balances under $1,000 went uncashed and required eventual resolution.... Here are six key factors that can contribute to unresponsive participants ... [P]lan sponsors should consider adopting the following best practices[.]" MORE >>
"[Field Assistance Bulletin (FAB) 2025-01] may be particularly helpful in the context of uncashed checks (e.g., amounts that have been involuntarily distributed or trailing distributions that go uncashed). However, plan fiduciaries should think carefully and consult with counsel about whether escheatment makes sense under various scenarios. It may also take some time for state treasurers to prepare to make the necessary representations, or for plan fiduciaries to conduct the necessary diligence if these representations are not available." MORE >>
"The Lost and Found Database is only as good as the information provided by the plan administrators of the employer-sponsored plans, often many years ago. Users may find that the database does not have all their employers listed, or may not show that benefits are due from an employer plan if the benefits were paid out long ago. Also, the employer and plan contact information may be out of date." MORE >>
"A plan fiduciary's choice of a distribution option for a missing participant's account is a fiduciary decision subject to the general fiduciary responsibility provisions of ERISA. Based on the DOL guidance on this subject, [this article provides] a discussion of what are considered to be best practices for locating missing participants. The DOL applies the list of best practices to both defined contribution plans and defined benefit plans." MORE >>
"With [FAB 2025-01], the DOL created a temporary enforcement policy to clarify that it will not automatically pursue plan sponsors who escheat funds to a SUPP for violations under the fiduciary duties of Section 404(a) of [ERISA] ... While this appears to be very good news for plan fiduciaries that may have a number of missing participants with these small balances (which may include uncashed checks from prior cash-out transactions), the key will be ... [that the] plan fiduciary has to take sufficient action to try to locate the missing participant/beneficiary." MORE >>
"[Field Assistance Bulletin No. 2025-01] is notable in that it provides some insight into how DOL views the fiduciary decision to voluntarily escheat benefits, but the relief provided by the non-enforcement policy is very limited. Notably, the FAB states that the non-enforcement policy is temporary because DOL 'intends to consider more formal guidance' related to escheatment in the future." MORE >>
"The EBSA has provided informal guidance ... [which includes] 'warnings' of a problem with missing participants ... [F]ew plan fiduciaries automatically get reports from their service providers about these 'warnings' ... [and] will need to request the information from their plan recordkeepers.... [T]he missing participant issue [is] one of the top investigation priorities for the EBSA and will almost certainly be a part of any investigation of an ERISA governed retirement plan." MORE >>
"[FAB 2025-01] allows temporary relief of DOL enforcement for fiduciaries who transfer retirement plan benefits of $1,000 or less owed to missing participants to a state unclaimed property fund. This relief is only provided if the plan fiduciaries comply with applicable conditions. But satisfying the applicable conditions can be overly-complex ... To verify if the fund qualifies as an 'eligible state fund,' ... nine conditions must be met by the state unclaimed property fund[.]" MORE >>
"[FAB 2025-01] states that the DOL is not precluded from asserting violations under ERISA Sections 107, 209, and 404 for failure to maintain records. Second, it states that it does not address federal income tax withholding obligations with respect to transferred amounts.... [R]etirement plans should withhold and remit federal income tax on transferred amounts in accordance with Section 3405 of the Internal Revenue Code until the IRS indicates otherwise." MORE >>
"Fiduciaries of ongoing plans may welcome this option for dealing with small amounts owed to missing participants and beneficiaries.... [T]he DOL notes that unclaimed property funds do not deduct fees (unlike IRAs) and maintain robust outreach and technology operations." MORE >>
"FAB 2025-01 provides that until the DOL issues formal guidance, the DOL will take no enforcement action (e.g., a claim of fiduciary breach) if an unclaimed account of no more than $1,000 ... is transferred to a state unclaimed property fund, provided [certain conditions are met] ... This guidance, while not complete relief or necessarily permanent, is welcome news for the sponsors and administrators of ongoing DC plans with significant numbers of unclaimed participant accounts." MORE >>
"Retirement plan fiduciaries now have an option to help manage small benefit amounts owed to individuals who cannot be located ... Under [a new EBSA enforcement relief policy], the department will not take action under the fiduciary duty provisions of [ERISA] against fiduciaries who transfer entire benefit payments owed to missing participants of $1,000 or less to state unclaimed property funds, if certain conditions are met." MORE >>
"Small plans are more likely to keep balances from uncashed checks in the plan (60%), whereas large companies are more likely to place those funds in a forfeiture account (71%). Less than half of plan sponsors (43%) have a formal written policy regarding missing participants. A third of organizations use an outside search provider to help track down missing participants." MORE >>
"Additional independent data sources are used -- not just the typical credit reporting agencies, commercial databases and internet searches.... Understand what data points specifically the locator service is updating.... Upon project completion, you are given detailed reporting. Not just a file.... The service aligns with many of the DOL's best practices for finding missing participants.... The service provider makes it easy and has cybersecurity measures in place." MORE >>
"[T]he voluntary program envisioned in the proposal raises several concerns for plan sponsors.... [1] [T]he DOL is seeking voluntary submission of data dating back to the date the plan became covered by ERISA.... [2] It is easy to imagine that the DOL could use the information submitted for the lost and found database to target plan sponsors for enforcement activities relating to missing participants.... [3] it is not clear whether this description of the DOL's security measures is sufficient to comply with the Department's own best practices for plan fiduciaries to consider when entrusting a third party with confidential participant information."
