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Missing Participants, Uncashed Checks: What to Do?

It seems inexplicable that a retirement check would not be cashed. But for a TPA, plan administrator, employer or plan sponsor, it’s more than inexplicable — it’s a problem. Recent blog entries make some suggestions regarding how to help make sure they don’t happen in the first place.

A recent entry in the PenChecks blog, “Four Tips for Preventing Uncashed Retirement Checks,” reminds that while “no plan sponsor or TPA likes dealing with uncashed retirement checks,” an employer still has fiduciary responsibility for the funds if a retirement plan check is not cashed.

Missing Participants

An uncashed check may be the result of something as simple as a plan participant going missing. And since the employer still has fiduciary responsibility if a check is uncashed, it must search to find the missing participant. “Steps to locate the participant or a beneficiary must be taken,” the TPA firm QBI also notes in a recent blog entry. “The failure to take such steps would violate the fiduciary obligations of prudence and loyalty, as set forth in Section 404(a) of ERISA.”

Finding missing participants requires expenditure of time and money, PenChecks notes, and even turning dormant accounts over to state officials does not mean that an employer will not still have to spend time and resources on the process. QBI strikes a similar tone, noting that some search steps cost little but that “other more expensive approaches may be required when the account balance is large enough to justify an additional plan expense and other efforts have failed.” In addition, QBI notes, the IRS and the Social Security Administration no longer offer the letter-forwarding services they once did.

QBI reminds that the Department of Labor (DOL) has outlined steps to be taken by terminating plans in finding missing plan participants:

Use certified mail. The DOL cites this as an “easy” and inexpensive way to determine whether a plan participant can be found.

Check related plan and employer records. The employer may have contact information in other files or in another of its plans, such as a group health plan. The DOL notes that plan fiduciaries of the terminated plan must ask the employer and administrator(s) of related plans to search their records for a missing participant’s more current address.

Check with designated plan beneficiaries. In the process of searching the records of a plan or those of related plans, fiduciaries of a terminated plan must attempt to identify and contact any individual the missing participant has designated as a beneficiary as another means to try to obtain accurate contact information for the missing plan participant.

Use free electronic search tools. The DOL recommends “reasonable” use of online search tools and databases.

QBI adds that there are additional means to find a missing plan participant, including enlisting the services of commercial locators, credit reporting agencies, information brokers and investigation databases.

Preventing Uncashed Checks

PenChecks offers some ideas on how to head off the possibility of uncashed checks in the first place.

  • Have a member of the HR department remind departing employees about the retirement plan and explain why it’s important that they take their accounts with them.
  • Encourage departing employees to roll over their retirement plan to the plan their new employers offer.
  • If a departing employee’s account balance is $1,000 or less and the plan has a cash-out provision and intends to send a check to the employee’s last known address, let the employee know he or she should expect to receive a check in the mail.
  • Have departing employees verify their current addresses.

To make these efforts more efficient, PenChecks suggests, it may be possible to automate some or all of these steps.

“Proactively implementing these steps can reduce the headaches that occur down the road when a former employee calls about unresolved health benefit claims or that last retirement plan check they never received,” Penchecks argues.