The Fundamentals of Locating Missing Participants

The Definitive Guide to Missing Participants

The definitive guide to the problem of missing participants in 401(k) and 401(k)-like plans, providing answers to key questions, as well as information and links to explore the many aspects of this important issue.

Topics Addressed:

  • What is a Missing Participant?
  • Why Plan Sponsors Should be Concerned About Missing Participants
  • What Causes Missing Participants?
  • The Magnitude of the Missing Participant Problem
  • What Regulations Apply to Missing Participants?
  • Sources of Uncertainty for Plan Sponsors
  • Best Practices for Finding Missing Participants
  • What to Look for in Missing Participant Search Services
  • Learn More About Missing Participants
  • RCH’s Missing Participant Search Service

What is a Missing Participant?

Definition of a Missing Participant: A missing participant is a former employee who has left funds in a qualified retirement savings plan (ex. – 401(k) plans) at their former employer, but has failed to keep their contact information current and is no longer actively engaged in managing their plan account.

Signs of missing participants include:
  • Returned mail
  • Returned emails
  • No recent web account or phone activity
  • An outstanding, uncashed distribution check
In most cases, missing participants realize that they have an account, but many may not realize that they have an account at all.

Closely related to missing participants are “unresponsive” participants, for whom a plan may have correct addresses, but are unable to be definitively contacted and who may not be acting in their best interest (ex. – not cashing distribution checks).

Finally, some participants may be deceased, a status which may be known or unknown to the plan's sponsor. If the status is known, then the plan's benefits are due to one or more beneficiaries, who must be located.

Why Plan Sponsors Should be Concerned About Missing Participants

  • For plan sponsors, missing participants can cause administrative burdens, increased plan costs and fiduciary risk.
  • Missing participants are viewed as a more-critical problem when they are at or near a distributable event (ex. – a required minimum distribution). When a distribution occurs or is due, the Internal Revenue Service (IRS) is keen to collect on deferred taxes, and the Department of Labor (DOL) has a natural interest in ensuring that participants receive the benefits owed to them.
  • For plan sponsors, missing participants can lead to plan audits, where the plan’s policies and procedures for locating missing participants can be scrutinized.
  • In the present environment, plan sponsors – particularly sponsors of active plans – complain that they operate with insufficient guidance in locating missing participants, and are sometimes subject to inconsistent enforcement actions.
  • For participants, not have a correct mailing address may result in a range of sub-optimal outcomes, including not being aware of major plan changes (ex. – investment changes, recordkeeper transitions, or plan terminations), missed transactions (ex. – uncashed checks) or even forgetting about the account completely.

What Causes Missing Participants?

Missing participants are caused by a combination of factors that include:
  • Employee turnover / job-changing: DC plan participants change jobs 10 times over the course of a 40-year career. Each year, 14.8 million DC participants will change jobs
  • Relocation: Americans will move almost 12 times over the course of a lifetime. In any given year, almost 1 of every 6 Americans will relocate.
  • Mortality: 16% of plan participants will die between 40 and 65. One of six participants die prior to normal retirement age
  • Lack of retirement savings portability: Barriers to portability result in high volumes of cashouts, plus a growing number of accounts that are “stranded” at job change
  • Plan features and changes: Auto enrollment increases the number of small-balance and “unknown” accounts, particularly at low deferral rates. In addition, events occur that change key elements of the plan, such as company mergers, acquisitions, name changes, recordkeeper transitions, etc.

The Magnitude of the Missing Participant Problem

A March 2018 survey by Boston Research Technologies revealed that 11.3% of separated, defined contribution account records have a stale address. Based on the number of separated participants in defined contribution plans, this suggests that there are, at minimum, approximately 3 million missing participant accounts. This number continues to grow as participants change jobs and relocate, leaving their retirement savings behind.

Other key findings from the Missing Participant Survey:
  • 1 of 5: Re-locations will result in a missing participant
  • One-third: Participants learn of a retirement account with a previous employer they did not realize they had
  • 60%: Participants who prefer an automated process to update address or consolidate accounts
  • 23%: Would utilize a lost & found database to locate a stranded account
  • 9%: Participants who would not verify their address if asked by a former employer

What Regulations Apply to Missing Participants?

Across the financial services industry, there are multiple regulations that deal with the problem of missing participants.
  • DOL FAB 2014-01: This guidance was issued in conjunction with the obligation of plan fiduciaries to search for lost and missing participants upon termination of a defined contribution plan.
  • IRS Rev Proc. 2015-27: The corrective procedures update guidance in light of the SSA terminating the SSA letter forwarding service.
  • IRS Field Directive regarding Lost and Missing Participants and RMDs (10/19/17): This guidance directs IRS examiners not to challenge a qualified plan as failing to satisfy the RMD standards under the Code provided that the plan takes the appropriate steps in seeking to locate the participant.
  • PBGC Guidance - 82 Fed. Reg. 60,800 – in conjunction with PBGC expansion of PBGC missing participant program. The regulation requires that plan administrators conduct a diligent search as a prerequisite to participating in the program.
  • SEC Rule 17 CFR § 240.17Ad-17 – The regulation describes search efforts that must be conducted by transfer agents and broker-dealers who maintain accounts of lost or missing accountholders.
  • National Council of Insurance Legislators Model Law. The Model law was enacted to ensure the timely payment of death benefits to beneficiaries.
  • OCC website: Each state has an unclaimed property program. Before sending the account balance to the state, the bank is usually required to try to contact the customer. Some banks publish the names of the account holder in a local newspaper. Some banks send a letter to the last known address of the account holder. The bank will turn over the account balance to the state if there is no contact from the account holder.

Sources of Uncertainty for Plan Sponsors

For plan sponsors, there is significant uncertainty over how best to address the problem of missing participants.
Plan sponsors are confronted with:
  • Lack of Guidance: Most recent guidance from the Department of Labor – DOL Field Assistance Bulletin 2014-01 – addressed terminated plans only, and does not address ongoing plans.
  • Inconsistent Enforcement Positions: Plan sponsors claim to receive inconsistent enforcement actions during audits, including extreme requirements to “keep searching every year, indefinitely” and to “do whatever it takes” including contacting former co-workers and family, or to notify participants of audit actions.
  • Fiduciary Risk: Failure to locate missing participants can result in increased penalties, risk of plan audits and potentially – a breach of fiduciary duty.
The American Benefits Council clearly outlined the concerns of plan sponsors in an October 2017 letter to the Department of Labor.

Best Practices for Finding Missing Participants

An emerging framework that could represent the best practices for locating missing participants balances the intensity of the search with the status of the missing participant.

For example, consider the following three scenarios:
1. Participant is well in advance of a normal distribution event.In this circumstance, a participant may not be receiving normal plan mailings.

Search approach: A low-cost, automated search performed yearly

2. Participant is nearing a distribution event. Since the participant is potentially at-risk of not receiving benefits earned, the intensity of the search is increased.

Search approach: An automated search, along with follow-on outreach to the participant and verification of their address (ex. – mailings).

3. Participant is at, or past a distribution event. In this case, the intensity of the search is further increased to include other search tools.

Search approach: Perform a “forensic” search, utilizing a search specialist with additional search tools.

Finally, locating participants in a terminating plan requires additional DOL-mandated steps, including the use of USPS Certified Mail when initial notification mailings are returned undeliverable.

What to Look for in Missing Participant Search Services

When examining commercial missing participant location services, plan sponsors should look for the following:
  • Experience: Track record of successful location of missing participants, under multiple regulatory regimes.
  • Results: Can demonstrate a 90-95% success rate in finding an updated address.
  • Affordability: Offers a cost-effective, low-cost automated process for handling a large (and potentially recurring) volume of missing participant searches.
  • Flexibility: Offers multiple search levels, depending on different search requirements.
  • Reporting: Delivers access to a complete online portal, including reporting, ad hoc inquiry and spreadsheet-based output, including filterable results.
  • Privacy & Security: All data is securely transmitted and stored. Provider is SOC 2-certified.
  • Audit Trail: All search history and participant interaction are saved for audit trail purposes.
  • Commitment to Continuous Improvement: Provider is committed to continuously updating and improving search processes to enhance reliability.

Learn More About Missing Participants

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RCH's Missing Participant Search Service

Retirement Clearinghouse offers an efficient, effective and affordable missing participant location service -- the RCH Address Location Service. The service offers four search levels, depending upon the severity of the missing participant problem encountered by the plan.

These levels include:













For more information, download the RCH Address Location Service information deck, email sales@RCH1.com or call (866) 827-9608.

The Fundamentals of Locating Missing Participants

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