IRS Memo Includes Guidance Regarding RMDs and Missing Participants

The memo lists actions plan sponsors should take to locate missing participants in order not to be challenged on violating RMD rules.

In a memorandum for Employee Plans (EP) examination employees, the Internal Revenue Service (IRS) directs EP examiners not to challenge a qualified plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code (IRC) Section 401(a)(9) if they have made a good faith effort to locate missing participants.

The agency explains that according to the RMD standards, distribution of a participant’s accrued benefit under a qualified plan must commence after the attainment of age 70½ of the participant or, in the case of a participant who is not a 5% owner of the plan sponsor, the participant’s retirement.  In certain cases, plans have been unable to commence or make a distribution to a terminated participant due to the plan’s inability to locate the participant.

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The memo says EP examiners shall not challenge a qualified plan for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan has taken the following steps:

  • Searched plan and related plan, sponsor, and publicly available records or directories for alternative contact information;
  • Used a commercial locator service; a credit reporting agency; or a proprietary internet search tool for locating individuals; and
  • Attempted contact via United States Postal Service (USPS) certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).

However, if a plan has not completed the steps above, EP examiners may challenge a qualified plan for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due.

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