The Employment Retirement Income Security Act requires plan fiduciaries to make reasonable efforts to locate missing participants or beneficiaries so that they may direct the distribution of their plan accounts. As a result, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) recently published Field Assistance Bulletin No. 2014-01, which lays out the steps fiduciaries of a defined contribution plan must take to locate missing participants before making distributions following a plan termination.
The employer’s first responsibility in terminating the plan is to notify participants that the plan is being terminated and that their benefits will be distributed. This initial notification may be done using certified mail or by electronic notification. If the participant does not respond to the notice, or if the plan fiduciary has a reason to believe that the plan does not have the most current address, then the fiduciary should take additional steps to locate the participant. The additional methods required by EBSA include the use of certified mail, a review of related plan and employer records, an interview with the designated plan beneficiary, and the use of free electronic search tools.
EBSA also identified additional steps for employers who complete the required steps and fail to locate a participant such as using paid Internet search tools, commercial locator services, credit reporting agencies, information brokers, or investigation services. Use of these additional methods should be considered depending on the amount in the participant’s account and the cost of using such methods. If these methods fail, EBSA recommends rolling the participant’s funds into an individual retirement account (IRA) as a first option, or opening an interest-bearing bank account. Transferring the funds to a state unclaimed property fund may also be necessary if the fiduciary can’t find an IRA provider who will take the rollover funds.