If it hasn’t happened to you already, you may have a future encounter with not being able to locate a former ESOP participant with a vested account balance. This can especially occur when there is a delay in paying the distributions to the ESOP participants due to participants moving to a new address and not providing notice to the Plan Administrator. When this happens, there are a couple of steps you should follow.
ESOP Plan Document Guidance
The first thing to look at is your ESOP plan document. The document should have a section that discusses missing or lost participants. If you do not see a provision in your plan document, check with your ESOP TPA or ERISA attorney to see if they can assist you.
The Department of Labor issued Field Assistance Bulletin (FAB) 2004-02 - Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plan. The bulletin states a plan fiduciary cannot distribute a missing participant’s benefits in the case of a terminated plan until it has tried using each of these methods to locate the missing participant:
Send a letter to the last known address via certified mail.
Check related plan records to see if more up-to-date information with respect to a given participant or beneficiary exits in another plan.
Check with the designated plan beneficiary concerning the location of the missing participant.
Use the Social Security Administration (SSA) letter-forwarding service. The IRS has a similar letter-forwarding service, but recently eliminated the use of it for this purpose with the release of Revenue Procedure 2012-35, effective August 31, 2012.
Other Search Options
The FAB also suggests using the following tools to locate a missing participant in addition to the four methods above:
Internet search tools
Commercial locator services
Credit reporting agencies
For more ESOP administration tips, please check out our FREE administration eBook!