Audit Time – Do You Know Where Your Participants Are? – Ask The Lawyer

Audit Time - Ask The Lawyer


“It’s their responsibility to notify us if they move, isn’t it? Why do I need to track them down?” A busy client asked me this question recently when I suggested that the plan should develop procedures for finding those participants who seem to be missing in action.

I am always surprised at the number of participants whose communications and even plan checks come back as undeliverable. They don’t update their contact information and may have even forgotten they have a benefit under the plan as they have moved on to other jobs. And, of course, there are also those who are deceased even though the plan doesn’t know about it.

This is more than a practical problem. I got that client’s attention by letting him know that the Department of Labor has announced that it has expanded to the whole country a pilot program in which it asks plan administrators to provide current contact information for selected participants. The DOL considers it a breach of fiduciary responsibility if the plan doesn’t know how to reach them. It is an IRS issue, too. On October 19, the IRS issued a memo explaining when examiners will not find a qualification failure if required minimum distributions haven’t been made because participants couldn’t be located.

IRS also requires that specific steps be taken to try to locate the missing participants.
What can plan fiduciaries do? An IRS letter forwarding program that used to be available isn’t an option anymore, but there are lots of practical steps to take and document. Here is a list that combines the DOL and IRS recommendations with some of my own-

• Send a letter by certified mail, which is less likely to get misdelivered. Also attempt contact through e-mail addresses and phone numbers, which may stay the same even if the participant’s mailing address changes.

• Consult public records and all of your plan and company files.

• Use a commercial search service. They are fast and some will locate people for a flat annual fee no matter how many you need to find. Many vendors have services of their own that you can use. Alternatively, you can use a credit reporting agency or a proprietary search service.

• Contact the beneficiaries listed on forms for all plans covering the missing participant and former co-workers. They may have current contact information.

• Go on the internet. Google the participant and check social media. Not too long ago, a client located a missing participant who had moved out of the country from photos on her Facebook page. LinkedIn may give you contact information for a current job.

• Use or get your vendor to use the Social Security death database. This is a record that is updated regularly.

• In your exit interviews, stress that terminated employees need to let you know if they move. Encourage them to give you an e-mail address and cell phone number.

None of this is foolproof, and some people may still be mia despite all of your efforts. But you need to show that you made a diligent effort to find people before forfeiting or-worse still- escheating their benefits. The DOL has reportedly been finding people who were supposedly lost just by sending certified mail, which is not good news for those plan sponsors. We hear that further guidance on the responsibility to find lost participants is in the works. This will be welcome, but failure to make a diligent effort to find them could already be an expensive lapse.

Carol Buckmann

Carol is the co-founding partner of our firm.  She is one of the top-rated employee benefits and ERISA attorneys in the United States and is widely known as an outstanding and innovative benefits lawyer, who deals with some of the foremost issues in ERISA, including pension plan compliance, fiduciary responsibilities, and investment fund formation.  Clients and other attorneys seek her advice due to her phenomenal depth of experience on  to complex pension law and fiduciary problems.  She regularly shares her thoughts about new developments in the benefits industry on our Cohen & Buckmann Benefits Blog


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