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ML BeneBits

The US Internal Revenue Service (IRS) recently issued guidance on appropriate steps to locate missing qualified plan participants. Specifically, the IRS issued a memorandum directing employee plan examiners not to challenge a qualified plan for failing to timely distribute required minimum distributions (RMDs) to missing participants if certain steps are satisfied. This guidance is of particular interest because of the emphasis that the IRS and the US Department of Labor (DOL) have placed on missing participant and timely benefit commencement issues. That is, in addition to this IRS issuance, the DOL has launched a series of investigations in recent years into the benefit payment practices of the defined benefit plans of a number of Fortune 500 companies, as outlined in a prior post.

Required Minimum Distributions

Section 401(a)(9) of the Internal Revenue Code (Code) establishes RMD requirements for qualified plans. These standards generally require a participant to begin to receive RMDs no later than April 1 of the calendar year after the participant attains the age of 70½ or retires. In the event of a deceased participant, RMDs must generally begin being paid to a non-spouse beneficiary within five calendar years after the year of the participant’s death. 

IRS Examination Guidance

The IRS indicated that if the steps set forth below are followed, employee plan examiners will not challenge a qualified plan for violation of the required minimum distribution standards for the failure to commence or make a distribution to a missing participant or beneficiary to whom a payment is otherwise due:

  • Search the plan and related plan, sponsor, and publicly-available records or directories for alternative contact information;
  • Use any of the following methods:
    • A commercial locator service;
    • A credit reporting agency; or
    • A proprietary internet search tool for locating individuals; and
  • Attempt to contact via US 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).

In light of the increased focus on these issues by the IRS and DOL, plan sponsors and administrators may want to consider reviewing their administrative practices concerning the location of missing participants and to consider whether those practices are consistent with the IRS's guidance, especially for participants approaching their required beginning date.