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Missing 401k Participants Consume Time and Money


Missing 401k participants can be a headache for retirement plan administrators.  Many plan administrators ask, How do I locate lost 401k participants?   More often than one would guess when retirement plan participants separate from service and leave funds in a 401k or 403b, they never re-contact their former employer.  What happens next, when plan sponsors cannot find those plan participants?

Listen to Peter Preovolos, founder of Penchecks and the National Registry of Unclaimed Benefits, discuss the problem and a potential solution, with Fred Barstein, Founder and CEO of the Plan Sponsor University.

Full Transcript Here

Fred Barstein with 401kTV here in Las Vegas at a NIPA annual conference for this week’s edition of Fred Talks. And I am here with Peter Preovolos who is co-founder and current president and CEO of PenChecks. He’s been there for 24 years and before that was a TPA Trust, President of NIPA at one point, and also the Head of San Diego’s retirement system. So, congratulations on all of that. Welcome, Peter.

Thank you. Great to be here, Fred.

Okay if we ask you a few questions?

I would love it.

Okay. So, I know a lot of what PenChecks focuses on is finding missing participants within defined contribution plans. And before we get into how your company is solving that problem, let’s talk about the issue, about missing participants. How does that come about? And what’s wrong with the system that sort of creates that problem? The leakage?

Well, it is a huge problem as you know. It’s a multibillion-dollar problem. It comes about from a lack of really staying in touch with your employees, throughout their employment history with you, and then especially as they leave, their exit of the company. Is somebody staying on top of them, making sure they understand that they’re going to be receiving instructions on benefit payments? If they’re gonna move, please make sure you notify your former employer that you’re moving. And so, what happens is, the person leaves, they receive something in the mail about what would you like to do with your benefits. Maybe they have moved by now or they ignore it. Over time, what happens is that communication is broken. And the employer of course now is in a quandary. What do I do?


And if the account balance of the participant is under 5,000 the law says the employer can establish an IRA for them.

Right. It’s called a Deemed IRA. They can get them out of the plan, but if it’s not 5,000, what do they do?

Then they stay in the plan.

Over five, so it stays over. So, the company could be saddled with lots of people in their plan. They don’t know where they are. They can’t communicate with them. So, how does PenChecks help? What do you guys do?

Well, one of the things we do is that we’ll do a search immediately. So, you have submitted something to us about a participant-

A plan sponsor.

… a plan sponsor. Submitted an individual’s name, their account balance. Can’t find them, we do a search. If we’re unable to locate them under that search, then the plan sponsor has a choice. If it’s under 5,000 they may set up an IRA with us. If it’s not under 5,000, the money will stay in the plan ’til that participant is located.

But let’s take the case where it’s under 5,000. We’ve now established an IRA. What we created when we first got into the creation of a default IRA, we created a company called The National Registry of Unclaimed Retirement Benefits.

It’s a catchy name.

Thank you very much, Fred. The purpose really was, that what happens if you’ve turned somebody’s money over to us, how do they find it?


How do they know where it’s at? And so, with The National Registry, there are 50 words/word phrase combinations in both English and Spanish that eventually will get somebody to that site. So, for example, if you said [speaking Spanish 00:03:39], it’ll get you to the site. And when you get to the site, it asks one question, enter your Social Security number. Don’t want your name, don’t want an address.

How many people and assets do you have in that National Registry?

Oh, the National Registry’s gotta have probably a database of about a half a million people in it.

A half a million people and all of those people have some, like, Deemed IRA in there?


And where are the assets? How much money are we talking?

Well, those assets are held in an FDIC insured …

You do?

Yeah, totally.

Safe accounts, yeah.

So, I’ll say that. Well, it’s my art design. That’s the Department of Labor …

That’s what they [crosstalk 00:04:20]-

… regulations. Yeah, it has to be a [crosstalk 00:04:24].

That’s a big problem we talk to plan sponsors about, those missing participants. Whether they’re under 5,000 or over, do the plan sponsors engage with you directly on this?

It depends. Many times, depending on the size of the company, we’re talking Fortune 1,000, 2,000-sized company, oftentimes they engage directly with us. The smaller companies engage with us through their actuary or their TPA firm, or recordkeeper or advisor, absolutely.

Okay, and so online it’s


All right, very good. Well, thanks for sharing that. That’s really valuable information. I know it’s a hot topic with our plan sponsor community.

I might say one other thing, with The National Registry, let’s say a plan sponsor somebody that has more than 5,000, and they’ve done a search, sent out the certified letter and still haven’t found them. Go online, register them with The National Registry. Doesn’t cost you anything. We created that company-

And you’ll help find them.

… we created the company as a non-


Not-for-profit organization. So, there’s no cost. So, now you can say I’ve closed the loop or done the [inaudible 00:05:32] asked me. And I’ve also registered them with the National Registry.

You got all the prudent documentation, which is what ERISA calls for.

That’s exactly right.

Fred, thank you very much for this opportunity. It was a pleasure.

Thank you, Peter. Thanks for watching this week’s version of Fred Talks, and stay tuned for more. Thank you.


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