MISSING PLAN PARTICIPANTS: WHATS THE PROBLEM? Charles M. Lax, Esq. - - PowerPoint PPT Presentation

▶
missing plan participants what s the problem
SMART_READER_LITE
LIVE PREVIEW

MISSING PLAN PARTICIPANTS: WHATS THE PROBLEM? Charles M. Lax, Esq. - - PowerPoint PPT Presentation

Sep 09, 2023 534 likes •735 views

November 2, 2019 MISSING PLAN PARTICIPANTS: WHATS THE PROBLEM? Charles M. Lax, Esq. Maddin, Hauser, Roth & Heller, P.C. maddinhauser.com 28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422 10/30/2019

slide-1
SLIDE 1

November 2, 2019

10/30/2019 1

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

MISSING PLAN PARTICIPANTS: WHAT’S THE PROBLEM?

Charles M. Lax, Esq.

slide-2
SLIDE 2

November 2, 2019

10/30/2019 2

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

2

Who Are “Missing Participants”?

  • Bad contact information
  • Unresponsive participant
  • Deceased participants

without a designated beneficiary on file

slide-3
SLIDE 3

November 2, 2019

10/30/2019 3

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

3

How Big Is This Problem?

  • Estimated that 11% of separated participants have

stale addresses

  • Estimated more than 3 million separated participants

are “missing”

  • Estimated that DC plan participants will hold an

average of 9.9 jobs over their career

slide-4
SLIDE 4

November 2, 2019

10/30/2019 4

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

4

What Are The Problems Created By Missing Participants?

  • Costs of maintaining accounts
  • Possible plan disqualification:

– Failure to meet RMD requirements – Failure to distribute benefits in accordance with plan provisions

slide-5
SLIDE 5

November 2, 2019

10/30/2019 5

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

5

What Are The Problems Created By Missing Participants?

  • Potential fiduciary liability

– Fiduciaries must act solely in the interest of plan participants and beneficiaries – Fiduciaries must act in accordance with plan provisions – Fiduciaries continue to have fiduciary responsibility

  • ver plan investments
slide-6
SLIDE 6

November 2, 2019

10/30/2019 6

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

6

What Are The Problems Created By Missing Participants?

  • Under EPCRS, plan correction
  • ften entails additional

distributions to former plan participants

  • IRS and DOL audits are

increasingly focusing on missing participants

slide-7
SLIDE 7

November 2, 2019

10/30/2019 7

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

7

What Are The Problems Created By Missing Participants?

  • For the affected participants

– Unaware of investment changes – Unaware of plan changes – Missing distributions – Forgetting about their benefits

slide-8
SLIDE 8

November 2, 2019

10/30/2019 8

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

8

What Can We Learn From Published Guidance?

  • DOL Field Assistance Bulletin No. 2014-01

(“FAB 2014-01”)

– Limited to terminating DC plans – Minimum steps

  • Certified mail
  • Check other records
slide-9
SLIDE 9

November 2, 2019

10/30/2019 9

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

9

What Can We Learn From Published Guidance?

– Minimum steps (continued)

  • Check with designated

beneficiaries

  • Use internet search tools
  • If prudent use locator services,

investigators, etc.

slide-10
SLIDE 10

November 2, 2019

10/30/2019 10

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

10

What Can We Learn From Published Guidance?

– If those fail

  • Roll to IRA
  • Pay over (net of taxes) to an

insured bank account

  • Pay over to the state’s

unclaimed property fund

IRA

slide-11
SLIDE 11

November 2, 2019

10/30/2019 11

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

11

What Can We Learn From Published Guidance?

  • IRS Website
  • Section 6.02(5)(d) of Rev. Proc. 2018-52

– Procedures under EPCRS – Similar to FAB 2014-01

slide-12
SLIDE 12

November 2, 2019

10/30/2019 12

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

12

What Can We Learn From Published Guidance?

  • PBGC’s Missing Participant Program (“MPP”)

– Only covers terminating DC and DB plans – Funds may be sent directly to the PBGC with participant information – Alternatively information may be sent about the disposition of the benefits

slide-13
SLIDE 13

November 2, 2019

10/30/2019 13

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

13

What Can We Learn From Published Guidance?

  • 2018 IRS Memorandum to its field agents

concerning missed RMDs

– Generally follows FAB 2014-01 – If followed, protects plan’s qualified status

slide-14
SLIDE 14

November 2, 2019

10/30/2019 14

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

14

Alleviating the Problem: Cash Out When Possible

  • The plan document must

authorize cash-outs

  • Establish a rollover IRA for

participants with balances of $5,000 or less

  • Send them a check for balances
  • f $1,000 or less
slide-15
SLIDE 15

November 2, 2019

10/30/2019 15

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

15

What To Do When There Are No Designated Beneficiaries

  • Look at the plan document

– Spouses – Children – Estate

slide-16
SLIDE 16

November 2, 2019

10/30/2019 16

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

16

What To Do When There Are No Designated Beneficiaries

  • Competing Death Beneficiaries

– Don’t guess which is the proper beneficiary – If all else fails, the benefits should be interpleaded into federal court

  • Best practice is to make certain that current beneficiary

designation forms are on file for all participants

slide-17
SLIDE 17

November 2, 2019

10/30/2019 17

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

17

What Are The Best Practices For Dealing With Missing Participants

  • Be diligent in maintaining good contact information

during active participation

  • At the time of termination of employment

– Update contact information – Remind the participant of their benefits – Let them know when they are available and how to apply for them

slide-18
SLIDE 18

November 2, 2019

10/30/2019 18

Maddin, Hauser, Roth & Heller, P.C. – maddinhauser.com

28400 Northwestern Hwy., Southfield, MI 48034 | p (248) 354-4030 | f (248) 354-1422

18

What Are The Best Practices For Dealing With Missing Participants

  • Monitor mailings (SARs, Benefit Statements, and
  • ther notices) to determine if contact information is

still good

  • When benefits finally must be paid follow FAB 2014-

01 or pay over benefits to the PBGC if eligible for MPP