Employers have been inundated with information regarding fee disclosure as it relates to their retirement plans over the last several years. One cost that is often overlooked is dealing with lost terminated participants. It is the employer's responsibility to track down these employees so they can be provided the necessary information and notices, as they are still participants in the plan. The problem is, what options do employers have since last year the Internal Revenue Service discontinued its letter-forwarding program to help find lost participants?
The Department of Labor suggests these methods in attempting to locate missing participants who may be due benefits:
* Use certified mail
* Check related plan records or other benefit plans
* Contact a designated beneficiary
* Use a letter forwarding service
* Google names or use social media options
* Use a search firm
No one solution works all the time, so employers will need to work to keep participant information up to date. The hidden cost is the HR time it takes to keep track and update records for terminated participants or to track down lost participants. Note that the DOL's Field Assistant Bulletin 2004-02 covers, in addition to these steps, other very helpful information about the plan sponsor's fiduciary duties with respect to missing participants. The bulletin is at: http://tinyurl.com/DOLFAB2004-2.
Plan sponsor's 2nd Quarter to do list
* If a plan audit is required in connection with the Form 5500, make arrangements with an independent accountant/auditor for the audit to be completed before the Form 5500 due date. (Calendar year plans)
* Audit first quarter payroll and plan deposit dates to ensure compliance with the DOL's rules regarding timely deposit of participant contributions and loan repayments.
* Monitor the status of the completion of Form 5500, and if required, a plan audit. (Calendar year plans)
* Issue a reminder memo or email to all employees to encourage them to review and update, if necessary, their beneficiary designations for all benefit plans by which they are covered.
* Perform a thorough annual review of the plan's Summary Plan Description and other enrollment and plan materials to verify that all information is accurate and current, and identify cases in which revisions are necessary.
* Begin planning an internal audit of participant loans granted during the first six months of the year. Check for delinquent payments and verify that repayment terms and amounts borrowed do not violate legal limits.
* Confirm Form 5500, and plan audit if required, will be completed prior to the filing deadline or that an extension of time to file will be necessary. (Calendar year plans)
* Review plan operations to determine if any qualification failures or operational violations occurred during the first half of the calendar year. If a failure or violation is found, consider using an IRS or DOL self-correction program to resolve it.
* Consult your plan's financial, legal or tax adviser regarding these and any other items that may apply to your plan.
Securities offered through LPL Financial, Member FINRA/SIPC.
Ludwig, ChFC, AIF, CRPS, is a financial adviser with LHDretirement and EBA's new retirement columnist. Reach him at
