Ellin & Tucker Offices

DOL Issues Additional Guidance Regarding Locating Missing Participants

By: Jared Rosen

On August 14, 2014, theJared Rosen (DOL) issued Field Assistance Bulletin (FAB) 2014-01 which provides updated guidance to fiduciaries of terminated defined contribution plans regarding locating and distributing plan assets to missing participants. Under the Internal Revenue Code, a plan administrator must distribute all of a plan’s assets as soon as administratively feasible after the termination of the plan. In some instances the plan administrator is unable to contact a plan participant in order to receive instructions regarding the distribution of their account balance.

The new guidance requires that fiduciaries perform the following procedures before concluding a search for a missing participant:

  • Send notices via certified mail
  • Check related Plan and Employer records
  • Check with the designated plan beneficiary
  • Use free electronic search tools (i.e. Google)

In addition, if the above steps are not successful the fiduciary must consider the size of the participant’s account compared to the related costs involved to determine if additional search methods are appropriate. The DOL suggests that the use of paid Internet search tools, commercial locator services, credit reporting agencies and other databases should be considered. Reasonable expenses for these services can be charged to the missing participant’s account in accordance with the Plan document.

If after reasonable search efforts, a plan administrator is still unable to locate missing participants an alternative distribution option must be selected. The preferred option is a direct rollover into an individual retirement account (IRA) since this option is more likely to preserve retirement funds. In circumstances when an IRA rollover is not feasible the DOL has identified federally insured bank accounts and state unclaimed property funds as other distribution options.

A fiduciary must conclude that such a distribution is appropriate and in the best interest of the participant despite the negative income tax consequences and potential early withdrawal penalties.

Based on the guidance in FAB 2014-01 plan administrators should consider documenting policies related to the search for missing participants and distribution of their balances. Although the FAB applies to terminating plans the recommended steps could also be applied for locating missing participants of an ongoing plan.

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