Treasury Issues New Guidelines on Searching for Missing Retirement Plan Participants
The US Department of the Treasury recently issued guidance that retirement plan sponsors should consider as part of their obligation to take reasonable steps to locate missing participants. Specifically, the Treasury issued a memorandum which sets forth guidelines that prohibit auditors from challenging qualified plans as failing to satisfy the required minimum distribution standards under Internal Revenue Code (IRC) Section 401(a)(9) if the plan has fulfilled all of the following with respect to participants that cannot be located:
Searched for alternative contact information in plan, plan sponsor and publicly available records for directories;
Used a commercial locator service, credit reporting agency or a proprietary internet search tool for locating individuals; and
Sent mail via United States Postal Service (USPS) certified mail to the last known mailing address and attempted contact “through appropriate means for any address or contact information,” which includes email addresses and telephone number.
The Treasury guidance is similar to, but also expands upon, prior guidance provided by the US Department of Labor, which addresses locating missing participants for terminated retirement plans.
Locating missing participants and beneficiaries can be challenging for plan sponsors. Many plan sponsors find that they are unable to locate participants who left employment many years prior and, as a result, are unable to make required minimum distributions. Both the IRS and Department of Labor have stepped up their enforcement of these requirements in recent years. In particular, the Department of Labor has made locating missing participants an enforcement priority for plan audits.