Can’t find missing participants? There is new guidance you should follow

ERISA plan administrators often struggle to find participants and beneficiaries who are owed benefits under their plans due to the required minimum distribution (RMD) rules. (Generally, benefits must commence by April 1 following the year in which the participant turns 70 1/2 or terminates employment, whichever is later.)

On Oct. 19, 2017, the IRS released guidance for its auditors to use in order to determine if a plan has a qualification issue when RMDs have not been timely paid to missing participants or beneficiaries. Under the guidance, auditors should not challenge a plan for violating the RMD rules for failing to commence or make RMDs to missing participants or beneficiaries 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 any of the following search methods: a commercial locator service, a credit reporting agency, or a proprietary internet search tool for locating individuals. 
• Attempted contact via United States Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers). 

The guidance specifically states that if a plan has not completed the steps above, an auditor may challenge a plan for violation of the RMD rules.  

Unfortunately, the guidance states that it does not address the application of any other qualification requirements or other applicable law, for example plan terminations.  Accordingly, when faced with the issue of missing participants or beneficiaries, plan administrators will need to follow the most recent guidance applicable to each particular situation.