By Tom Hawkins | May 26, 2023
If a tree falls in the forest, does it make a sound? Opinions are split on this weighty philosophical matter, but a more-definitive answer to another question may surprise you.
If a search for a missing participant is not properly documented, is it a diligent search? To regulatory authorities who may scrutinize a plan sponsor’s search efforts, the answer is decidedly “no.” For a regulator to consider a search to be diligent, it must be well-documented, and to do otherwise can result in audits, penalties and increased fiduciary risk.
Here are five tips for plan sponsors to better document their missing participant search efforts.
Typical drivers of missing participant searches include:
- A terminated participant’s account has no recent activity
- A stale address or returned mail
- An uncashed distribution check
- A pending required minimum distribution (RMD)
- Advanced age or other question of life status
- A plan termination, where required mailings generate returned mail or unresponsive participants
Clearly documenting the reason(s) prior to conducting searches is important to show that a sponsor has adequate situational awareness guiding their subsequent search activities. It also helps categorize missing participants so that an appropriate search methodology can be applied.
- Searching internal records or publicly available information for alternative contact information.
- Utilizing a credit reporting service
- Engaging a commercial search provider for:
- Electronic, or e-searches
- Follow-on, intensive searches using additional search tools
- Ongoing monitoring of life status
- Conducting personal outreach to locate participants or their beneficiaries (ex. – email, phone, or social media) and/or the use of USPS Certified Mail
For example, a plan sponsor may have participants whose mail is being returned as undeliverable. For these participants, they may employ low-cost but reasonably effective electronic searches. At the higher end of the urgency scale, when participants are due but are not taking RMDs, the plan sponsor will likely employ more intensive searches.
Search results should document:
- Current participant data on file when the search was initiated
- Search timeframe
- All data fields returned from the search
- An interpretation of the data that was returned, including:
- No data returned
- Data is obtained, but is the same as current data on file
- Data is obtained, but differs from current data on file
- Participant data is positively verified by the actual participant, a surviving family member or their beneficiary
These outcomes can be translated into unique “result codes” that are vital to determining if additional search activity is indicated, or if updates can be applied to participant plan data. If you utilize a commercial search service, ensure that they will provide an output report with all resulting data, including clear and concise result codes for each search they performed.
As with any important documentation that may be subject to a third-party audit, search information should be kept up to date, should be thorough, and be accurate. It should also be stored in a secure location, accessible only to authorized individuals.
If an audit takes place, and the plan sponsor has engaged a commercial search provider, providing the auditor with a complete, detailed description of the provider’s search process is very useful. In situations where participants should be receiving benefits, but are otherwise still deemed missing, having the commercial search provider issue an audit letter attesting to the search steps that they undertook can be extremely helpful.Back