Addressing the Issue of Missing Participants

March 18, 2013 ( - Thanks to the Internet, locating lost participants is no longer like finding a needle in a haystack—but it’s better to avoid the problem in the first place.  

Now that the Internal Revenue Service (IRS) has stopped forwarding letters for lost participants (see “IRS Stops Forwarding Letters for Missing Participants”), the search ultimately falls on the plan sponsor. In September, the IRS announced it will no longer forward letters on behalf of plan sponsors or administrators of qualified retirement plans or qualified termination administrators (QTAs) of abandoned plans under the Department of Labor’s Abandoned Plan Program who are attempting to locate missing plan participants and beneficiaries.   

The agency noted that since its letter-forwarding program began, numerous alternative missing person locator resources, including the Internet, have become available to assist a plan sponsor or plan administrator in locating a missing participant or beneficiary owed a retirement benefit.    

Plan sponsors can also enlist the help of their recordkeepers or other outside sources if the search for participants seems too daunting. Rollover service provider Retirement Clearinghouse specializes in employee retirement transition services (job changes), assisting plan sponsors, providers and the participants by providing in-person education for employees either entering a plan or leaving it.

According to the Employee Benefit Research Institute, the average employee will change jobs 7.4 times over their 40-year career. “We’re a mobile nation of workers. We’re all over the place,” Spencer Williams, CEO of Retirement Clearinghouse, told PLANSPONSOR.  

Stopping the Problem at its Source   

Given the frequency at which people change jobs, Williams said the best thing plan sponsors can do is stop the problem of lost participants before it starts by maintaining current records. Each time Retirement Clearinghouse performs a service, it conducts a verification of the individual’s address. This sets the stage for solid participant records and can prevent problems in the future.

When it’s determined that an employee will leave the company, plan sponsors should provide information about how to keep their address current so they can continue receiving information related to their retirement plan, said Neil Smith, executive vice president of strategic business support services at Ascensus. Plan sponsors and their recordkeepers should also educate employees about the importance of updating their personal and beneficiary information, as well as send out a reminder at least annually to employees to update this information, he said.

In addition, plan sponsors should work with their recordkeepers each quarter to review returned statements, utilizing forwarding addresses and, if necessary, a locator service. “By maintaining a consistent effort of following up on returned statements, the chances of finding someone are greatly increased,” Smith said.

Ascensus, like many recordkeepers, will initiate locator services for returned distribution checks or returned statements at the plan sponsor’s request. Ascensus Participant Locator Services includes a partnership with the United States Postal Service, combined with automated public record searches. Ascensus has a high rate of success in locating participants, Smith said—it works about nine out of 10 times.

The Internet Can Help  

If records are not up to date and a participant is lost, the Internet may be the plan sponsor’s best friend. Dan Wright, COO of Retirement Clearinghouse, said his company first searches the Internet for obituaries. If the participant is still alive, the company then uses Melissa Data, Experian, LexisNexis and to locate participants. “You have to be very, very creative,” Wright said.

Once, Wright said the company even used IMDb—Internet Movie Database—to locate participants who worked in film.

All the creativity seems to be working, as Wright said Retirement Clearinghouse supports more than 100,000 individual retirement accounts (IRAs) in its system and has less than a 6% missing participant rate.

Public record search technology is a great tool for locating participants, Smith added. He suggests combining the employer’s data (first and last name, date of birth, Social Security number and last known address for plan participants) with public records. “Public record search technology is valuable because it helps to locate missing participant information and/or their beneficiaries both quickly and accurately,” he said.

In 2009, PenChecks Inc. developed a website that can help organizations holding retirement funds for missing participants. The National Registry of Unclaimed Retirement Benefits is a nationwide, secure database service that can match missing participants with their unclaimed retirement benefits at former employers (see “Database Lists Millions in Unclaimed Retirement Benefits”). As of May 2009, PenChecks had records of almost $151 million in unclaimed retirement benefits.

Any organization holding retirement funds for missing participants can register online for free and create an account to add the missing participant records to the database. When one of those participants performs a free search in the database, the organization receives an automatic email notification.