DOL Guidance Regarding Locating Missing Participants Requires Plan Fiduciaries To Make Reasonable Attempts To Locate The Participant Before Making Distributions


Locating and distributing the account balances of missing or unresponsive participants invokes ERISA’s fiduciary duty rules. The U.S. Department of Labor (DOL) had previously issued guidance outlining the expectations and requirements for fiduciaries in such instances but recently updated its guidance as a result of the IRS and Social Security Administration both eliminating their respective letter forwarding services. Given the abundance of low cost and free search methods available to fiduciaries, the DOL expects a fiduciary to always utilize such low cost alternatives before abandoning efforts to find a missing participant, regardless of the size of the participant’s account balance.  At a minimum, fiduciaries should take all of the following steps before abandoning efforts to find a missing participant:  (i) use certified mail; (ii) check related plan records (e.g., an employer’s group health plan); (iii) contact the participant’s designated beneficiary (e.g., spouse, children, etc.) to find updated contact information; and (iv) use free electronic search tools such as search engines, public records, obituaries, and social media.  If the above steps do not work, the plan fiduciary should consider additional search tools such as locator services and credit reporting agencies, before giving up the search.  Because plan fiduciaries may allocate the fees associated with the search to the missing participant’s account, the size of the missing participant’s account balance and costs of the search must be considered.  The DOL advises that if a plan is unable to locate a participant, the plan fiduciary may distribute the account balance to an IRA it establishes (the preferred option) or to an interest-bearing bank account. However, under no circumstances should a plan use 100% income tax withholding as a means to deal with  benefits. Because plan document provisions or policies pertaining to locating missing participants may reflect outdated DOL guidance, plan fiduciaries should consider amending their plan documents and policies.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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