Missing Participants: Ready or Not, Here I Come!
Most plan sponsors can relate to the trials and tribulations of having missing participants in their retirement plan. At times, it may feel like you are on the losing end of an intense game of hide-and-seek. Your opponents, the missing participants, may not have intended to pick the best hiding spots, but in many cases, they have surely succeeded. Now you are tasked with tracking them down and upping your game to avoid this scenario in the future.
So, what are missing participants, exactly? Missing participants are former employees who left an account balance in a retirement plan and did not keep their contact information up to date. In addition, they may no longer actively manage their accounts. There are a few factors that have led to an increase in the number of missing participants in retirement plans over the years. Unlike the generations of our parents and/or grandparents, employees do not typically work their entire career with one firm anymore. Another contributing factor is the mobilization of the workforce. The ability to work remotely has mobilized employees even more these days. Some have chosen to relocate across the country while others find themselves living in a new locale every few months. Many of us can relate to this, especially over the past 18 months. With these two factors alone, it can be difficult to keep track of plan participants once they leave your firm.
It is important to develop procedures to ensure contact information is up to date and to illustrate the proactive measures employed in this effort. Whatever steps you implement, you should relay to employees and participants why keeping these details current is important and how it can affect them. Ask any employee if they would be okay with losing track of their retirement account - the answer would probably be a resounding no. A few ideas based on the Department of Labor’s (DOL’s) Best Practices are included below.
- Annual Review: Have plan participants verify their contact information on file at least annually. This includes addresses, phone numbers, and email addresses. You can also include a review of beneficiaries at this time. Keep in mind this does not only include current employees but terminated or retired participants as well. Also consider making the review part of your company's exit interview.
- Mailings: When completing a mailing, provide a form where recipients can update their contact information.
- Returned Mail: Initiate searches for participants as soon as mail has been returned as undeliverable. This includes mail marked as "return to sender," "wrong address," "addressee unknown," or otherwise.
- System Log In: If participants regularly log into a system, set a reminder or pop-up directing users to verify their contact information.
Unfortunately, even with the best of plans in place, plan sponsors may still have participants who go missing. So, not only do you need to incorporate procedures for ensuring contact information is up-to-date, but you also need to document procedures for locating participants once they go missing. The DOL provides a list of search methods that should be used to locate missing participants. Some of these methods are included below.
- Send a notice using certified mail through USPS or a private delivery service with similar tracking features.
- Check the records of the employer or any related plans of the employer.
- Send an inquiry to the designated beneficiary or emergency contact of the missing participant.
- Use free electronic search tools or public record databases.
At some point, most plan sponsors will find themselves with participants who have gone missing. It's important to remember plan sponsors have a fiduciary responsibility to follow the terms of the plan document and ensure participants are paid out timely. Having a well-documented, organized process which addresses missing participants, along with proof the process is followed, will prove worthwhile.
More information regarding the Department of Labor's Best Practices can be located on their website.
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This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.