What is a Missing Participant?
- A missing participant is a qualified plan participant who can not be located by the plan for the purposes of executing transactions (ex. - required minimum distributions, distribution checks, etc.) or for whom mailings are consistently returned due to an incorrect address. It is estimated that anywhere from 3%-6% of qualified plan participants are consider "missing" and requiring location. Missing participants can cause administrative burdens, increased plan costs and fiduciary risk (ex. - missed mailings and uncashed distribution checks).
What Causes Missing Participants in Plans?
- Changes of residence. American society is highly-mobile. Census data suggests that the average American will move almost 12 times over the course of a lifetime. In any given year, almost one out of every six Americans will relocate.
- Changes in employment. According to the Employee Benefit Research Institute (EBRI), the average defined contribution plan participant will change jobs almost 9 times, on average, over the course of a 40-year career. This means that about 14.8 million defined contribution participants will change jobs each year.
- Early mortality. Mortality tables inform us that, on average, more than 16% of plan participants will die between the ages of 40 and 65. This means that one out of six participants will die prior to normal retirement age.
Why is it Important to Locate Missing Participants?
- Keeping current addresses for plan participants is critical to providing participants with up-to-date plan information, including informing participants that benefits are payable, and to make required minimum distributions (RMDs).
- Failure to establish and/or follow procedures to locate missing participants can be considered a breach of fiduciary duty, and can subject plans to penalties of $28 per participant.
How to Locate Missing Participants?
- Initiate Periodic Data "Scrubbing" Efforts at Termination. The best solution is one that keeps participant data as up-to-date as practical, with the least cost and with minimal manual intervention. A periodic program of "scrubbing" participant data can begin as soon as a participant has terminated employment. An example of this approach is utilizing the National Change of Address (NCOA) registry, maintained by the United States Postal Service.
- Utilize "Waterfall" Methodology with Credit Service Bureaus. Given that data "scrubbing" will not identify correct addresses for all missing participant scenarios, resulting in returned mail or failed transactions (ex. - required minimum distributions, uncashed or staled-dated distribution checks), we suggest employing a major credit service bureau to determine participant status. This approach utilizes a "waterfall" methodology that invokes additional searches, as needed, or required until the participant can be found or the services exhausted.
- Engage Subscription-Only Legal & Journalistic Services. In specific states (ex. - Nevada) and for deceased participants, subscription-only legal and journalistic services such as Lexis-Nexis can be engaged. In the case of participants who have been confirmed as deceased, these searches can be particularly useful in locating next-of-kin.
- Perform "Last-Ditch" Creative Searches. When the best practices above yield no results, locating missing participants becomes an art form, where success depends upon persistence and creativity applied in using the internet to locate a participant or to identify beneficiaries.
More Information on Missing Participants
Missing Participants (RCH Blog articles)
Retirement Clearinghouse’s Missing Participant Location Services
RCH’s Lost & Missing Participants location service delivers the most effective and flexible participant locator service for plan sponsors with large numbers of separated participants.
Designed for plan sponsors with large numbers of separated and missing participants, RCH Lost & Missing Participant Services includes best practices to flexibly and affordably locate them, including:
- Employs a "funnel" principle to find missing participants, engaging the most cost-effective services first
- Initial services include basic electronic search, including National Change of Address (NCOA), Experian and Lexis/Nexis.
- More extensive search services are employed as required or requested by the plan
- Level 2 searches include Level 1 electronic search, plus mailings to original and updated addresses -- also includes RCH Service Center access.
- Level 3 searches include all previous levels, plus return mail tracking, Internet and social media search.
- Level 4 searches include all previous levels, plus USPS certified mail service.
For a full brochure on RCH Lost & Missing Participants Services, click here