Department of Labor (DOL) Issues Updated Guidance for Dealing with Accounts of Missing Participants Under Terminated Defined Contribution Plans
The effective termination of a defined contribution plan requires the plan fiduciary to timely distribute ALL plan assets, which can be complicated if certain participants cannot be located. Due to changes in available search vehicles and Internet-based search tools, the DOL has updated its guidance on discharging fiduciary responsibilities to participants who cannot be located upon termination and distribution of such a plan. This guidance requires a thorough search utilizing all available avenues – including various Internet-based resources – for which no charge is assessed (although some cases may require paid search services). If the missing participant cannot be located, the plan fiduciary should prudently select an IRA provider (preferably following DOL safe harbors) to receive the distribution of the missing participant’s account balance. As a last resort only, the plan fiduciary can distribute the account balance to a bank account in the participant’s name or to a state unclaimed property fund. Under no circumstances should the fiduciary treat the full amount of the participant’s account balance as having been withheld for income tax purposes.
Learn more about the updated guidance for dealing with accounts of missing participants under terminated defined contribution plans in the new Washington Report.