Insights

On Feb. 23, 2018, the IRS issued a memorandum to employee plans auditors that discusses the steps an employer should take in attempting to locate missing plan participants. As background, the memo specifically addresses how to locate missing participants who may be due required minimum distributions from their 403(b) plan. However, the IRS guidance is also helpful for any situation where an employer must locate participants for purposes of distributing benefits.

Keep in mind, though, that this guidance is virtually identical to the guidance provided to auditors examining 401(k) plans and any issues with required minimum distributions. (We reported on that guidance in the Nov. 14, 2017 edition of Compliance Corner.)

The memo specifies that IRS auditors won't challenge employers for a failure to make certain employee distributions if they did all of the following:

1. Searched for alternative contact information in plan, plan sponsor and publicly available records for directories
2. Used a commercial locator service, credit reporting agency or a proprietary internet search tool for locating individuals
3. Sent mail via United States Postal Service to the last known mailing address and attempted contact through appropriate means for any address or contact information, which includes email addresses and telephone numbers

These requirements line up with prior DOL guidance on the subject of locating missing participants, and so 403(b) employer plan sponsors who take such steps to locate employees would likely be considered to have met their search obligations as imposed by both the DOL and IRS. The guidance became applicable after Feb. 23, 2018.

Memorandum »