Companies that offer a qualified retirement plan (a defined contribution or defined benefit plan) must often deal with the challenge of finding a missing participant. This happens when former employees do not provide current contact information, are no longer actively engaged in managing their plan account, and cannot be contacted about their benefits.

Who is a missing participant?

A missing participant is an individual who left the company (whether through termination or job change), relocated, or passed away, and has lost track or was not aware of their retirement benefits. In some cases, the plan has been terminated and benefits must be distributed, but the employer cannot locate the participant. Either way, the plan sponsor has a fiduciary obligation to find missing participants to transfer funds to those former employees.

The costs associated with missing participants

Unclaimed retirement plan accounts cost former employees the money they leave behind and do not roll over into a new employer-sponsored plan or an IRA. Employers are left with the administrative burden and high manhour costs of complying with regulations about missing or nonresponsive participants.

The inability to locate missing participants puts the plan sponsor at risk for noncompliance due to failure to transfer funds, pay required minimum distributions (RMDs), and meet plan disclosure requirements. The inability to make timely RMDs can result in employer and participant penalties. In addition, beneficiaries will experience a delay in death benefit distributions.

Further, if the sponsor is terminating the plan, missing participants may delay the official termination date, as plan termination cannot happen until all remaining account balances are paid out. This will also trigger another year of required audit and governmental filings.

Measures for avoiding or locating missing participants

Proactive steps

The Employee Benefits Security Administration (EBSA) has issued proactive steps and red flags (such as undeliverable mail and uncashed checks) for plan sponsors and/or custodians. Foremost is to contact current and retired participants and beneficiaries periodically to maintain accurate, always-updated census records (addresses, phone numbers, email addresses, and emergency contacts).

If the record keeper has changed or the company has undergone a merger or acquisition, all appropriate plan and participant information must be transferred along with relevant employment records. For companies that use third-party record keepers, EBSA recommends following up to ensure that plan records and participant communications are being maintained per the service agreement. Enact and document all retirement plan procedures, decisions, and steps taken to implement the plan policies.

Also, make it easy for participants to update their contact information via online platforms and regular communication. Use clear, simple language in corporate communications and state upfront that the communication is about plan eligibility, benefits, or contact information updates.

Locating missing participants

The U.S. Department of Labor (DOL) and EBSA issued guidance for plan fiduciaries on steps to locate missing participants or to get them to respond, “whatever it takes.”

• Conduct annual searches using different methods—and do so indefinitely for nonresponsive participants. Methods include:
  • Letters sent by U.S. Postal Service and other mail services
  • Email, phone calls, texts
  • Commercial locator services, credit reporting agencies, or proprietary internet search tools
  • Search engines, public record databases social media, Social Security Death Index, obituaries
• Contacting the former employee’s emergency contacts and/or designated beneficiaries
• Contacting current and former employees who may have worked concurrently with the missing participant
• Checking union office records (for unionized employees) or group health plan or payroll records
• Registering missing participants on public and private pension registries such as the National Registry of Unclaimed Retirement Benefits (which has privacy and cyber security protections).
  • Publicize the registry through emails, newsletters, and other communications to existing employees, union members, and retirees

A SECURE Act 2.0 remedy for missing participants

A provision under the SECURE Act 2.0 stipulates that the U.S. Department of Labor (DOL) with the Department of the Treasury will create an online national “lost and found” database of retirement plans. This Retirement Savings Lost and Found will be for all former employees to search for and connect with the administrator of their retirement plan. The deadline to establish this database is nearly 18 months away (December 29, 2024) and regulations for it are not yet drafted. 

At Intac FuturePlan, we are following this action and will provide updates as the database progresses. Your plan consultant can provide additional details regarding the importance of timely and proper payment of distributions to avoid auditor red flags, and guide you through the procedures to prevent missing participants proactively. If your company’s qualified retirement plan has missing participants, we can refer you to a trusted locator service for assistance.