What’s your Responsibility to Find Missing 401(k) Plan Participants?

By Craig Erickson 

As the fiduciary of a 401(k) plan, you are responsible for retirement plan participants, even if they’ve left your company with no forwarding addresses or you have contact information that’s no longer valid.

If employees work at your company long enough to take part in your 401(k) plan, and then disappear, moving from state to state, taking a series of jobs,  how responsible are you for tracking them down?

When a participant cannot be located via routine delivery methods, first class mail or electronic notice, plan fiduciaries must take additional steps to locate participants. According to ERISA requirements, plan administrators must make a reasonable effort to locate the missing participants and properly distribute plan account balances. ERISA regulations allow you to charge the accounts of missing participants for the cost of reasonable search efforts.

Here’s what you need to do to locate missing participants, according to the U.S. Department of Labor’s Field Assistance Bulletin No. 2014-01.

• Use electronic search tools. Search engines are an invaluable tool. For most searches for missing participants, this is the logical and most time-efficient first step.
• Send certified mail. If you think you have a valid address for the missing participant, send a certified letter. The cost is reasonable, and you’ll have a record of the attempt.
• Search related plan records. Look for answers under related coverage. For instance, the individual might have provided better contact information with your group health plan.
• Contact plan beneficiaries. The missing participant is likely still in contact with beneficiaries of the plan. And if the beneficiaries don’t have the information you need, they may be able to provide information to aid your search.

Additional search steps

Beyond that, fiduciary responsibility falls into a gray area. The DOL field assistance bulletin doesn’t provide much further guidance beyond stating that “the duties of prudence and loyalty require the fiduciary to consider if additional search steps are appropriate” when reasonable efforts fail. According to the DOL, important considerations include the account balance and the cost of additional effort. Fiduciary duty requires making reasonable efforts to find missing plan participants and an expanded search if the participant’s account balance is large enough to justify the extra steps.

If you decide to proceed with a more complex and costly search, consider contacting credit reporting agencies and using online investigation databases and commercial locator services. And while a previous DOL field assistance bulletin on the topic mentioned letter forwarding services from the IRS, the agency no longer offers this option. A failure to act is a breach of fiduciary duty, so it is vital that plan fiduciaries understand what steps must be taken.

Craig Erickson is partner-in-charge of the Employee Benefit Plan Group at Wiss LLP. Reach him at cerickson@wiss.visioncreativegroup.com.