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Many employers discover that finding missing participants can be next to impossible. The DOL requires that plan fiduciaries take certain steps in an effort to locate missing participants or beneficiaries before such participants account assets are distributed. In addition to the acceptable search methods outlined by the DOL, the plan administrator must also consider the size of the participants account balance in comparison to the expense involved in attempting to locate a missing participant.
Accordingly, the specific steps that a plan fiduciary must take to locate a missing participant may vary depending upon the facts and circumstances. Expenses incurred in locating missing participants may be charged to the participants account, so long as the amount of such expenses is reasonable and the method of allocation is consistent with the terms of the plan document and the plan fiduciarys duties under the Employee Retirement Income Security Act (ERISA).
In the event that the missing participant cannot be located, despite the utilization of the required methods, the DOL recommends distribution of the assets in one of the following methods:
- Individual Retirement Plan Rollovers: Preferred distribution option to preserve the tax-deferred status of the assets
- Vendors with Rollover Solutions: Penchecks, Millennium Trust Company, The Bancorp Bank, E*Trade Financial, Matrix, MG Trust Company LLC, Merrill Lynch
- Federally Insured Bank Accounts: Establish an interest bearing federally insured bank account in the name of the participant, which must allow the participant the right to withdraw funds from the account
- Escheat to State: Plan fiduciaries may transfer missing participant account balances to the State unclaimed property funds in the State of each participants last know residence or work location
- 100% Income Tax Withholding: Such withholding is intended to offset the missing participants income tax liabilities; however, the DOL indicates that this manner of distributing the participants account balance from the plan should NOT be used by plan fiduciaries
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Assurance Financial Services, Ltd and Assurance Agency, Ltd are not affiliated with Kestra IS or Kestra AS. Assurance Financial Services, Ltd is a wholly owned subsidiary of Assurance Agency, Ltd.
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