Lost Retirement Plan Participants Continue to Pose Challenges for Employers

March 28, 2018

The Department of Labor (DOL) and IRS have become increasingly concerned that lost and missing retirement plan participants are not receiving plan benefits to which they are entitled. The regulatory agencies have not issued formal guidance on the topic since the DOL’s Field Assistance Bulletin 2014-01, but IRS internal memorandums to retirement plan audit staff in October 2017 and February 2018 continue to reflect the heightened concern in Washington.


Today’s workforce is increasingly becoming more mobile and employees often times forget the importance of keeping their address current with the holder of their retirement plan accounts from former employers. Additionally, employers often do not have a robust benefits communication process implemented for when employees leave. This results in employer-sponsored retirement plans with large numbers of unattended terminated employee accounts. Both employees have forgotten about the accounts and employers have no effective mechanism for keeping them informed.

If not sufficiently addressed, this can have several unattended consequences for employers that find it difficult to manage these lists over time. Small account balances for missing participants can drive up plan administration fees and cause the plan to require an audited financial statement because it crosses the threshold for becoming a large plan. Fiduciary issues can arise when plan custodian changes are made without any interaction with former plan participant’s whose accounts are going to be invested in a new investment platform. Plan custodians also often issue checks to participants with old addresses resulting in a stale check problem. These administrative issues can cause things to snowball from a fairly limited problem to something that is quite difficult to resolve.

While the administrative concerns have limited regulatory impact, other missing participants issues are not quite so benign. The IRS has specifically referenced required minimum distributions (RMD) in their internal memos as being of particular concern. Failure to satisfy RMD requirements, unlike administrative issues, can give rise to operational defects which can jeopardize the tax-qualified status of the plan and lead to potential fines and penalties. Merely processing checks mailed to the last known address does not necessarily meet the RMD requirement and it often causes additional headaches because of the resulting stale checks.

Participants are impacted by this issue as well. It is surprising just how many participants lose track of their retirement funds, happening sometimes to accounts worth tens of thousands of dollars! In doing so, participants could find it extremely difficult to track down funds from their former employers. Bankruptcies, acquisitions, and name changes can send participants on a wild goose chase that results in great frustration, with limited avenues for resolution. Not to mention the difficulties one’s beneficiaries can have when trying to track downs funds to which they are entitled.


Employers need to take greater steps in finding former participants and better communicating to former participants the importance of keeping their address information up to date with the custodian holding their account.

The regulatory agencies believe it is the sole responsibility of employers to find employees that are due RMDs. The internal memos to plan auditors instruct staff to not challenge RMDs not taken by missing participants if certain steps have been taken in attempt to locate the participants. These include:

  • Searched available records and attempted contact based on what information was found,
  • Used one of the following search mechanisms:
    • Commercial locator service(s)
    • Credit reporting agency
    • Internet search tool for locating individuals, even if a fee is required
  • Attempted contact using the U.S. Postal Service via certified mail

Failure to take robust actions and keep track of terminated participants can put both the plan and plan sponsor at risk. For more information on the importance of keeping track of terminated participants, please contact our plan specialists at 301.231.6200.