The Internal Revenue Service (IRS) recently discontinued its letter forwarding service for missing participants or beneficiaries entitled to a benefit under an employee retirement plan. Specifically, Revenue Procedure 2012-35 provides that the IRS will no longer consider locating a missing individual who may be entitled to a retirement plan payment or other financial benefit as a “humane purpose” under their program, effective for requests postmarked on or after August 31, 2012. Instead, the IRS letter forwarding service will be limited to “humane purposes” such as when someone is trying to locate a taxpayer to convey an urgent or compelling message, perhaps about a medical issue, or in an emergency situation.
Until now, retirement plan sponsors have frequently used the IRS letter forwarding service as a way to locate missing participants or beneficiaries to pay benefits owed under an employee retirement plan. As part of the service, if an employer submitted identifying information, the IRS would attempt to forward a letter about the benefit to a missing person. The U.S. Social Security Administration also maintains a letter forward service, which can still be used. The main difference between the two services is that the Social Security Administration charges a flat fee of $35 per letter forwarded, whereas the IRS service was free for requests involving fewer than 50 participants.
Another option for a terminating pension plan is the Pension Benefit Guaranty Corporation (PBGC) missing participants program. Employers terminating a single-employer defined benefit pension plan may, following their own search, pay the benefit to the PBGC and have the PBGC search for the participant in connection with the pension plan’s termination. Participants may also search for missing benefits through the PBGC. The Pension Protection Act of 2006 directed the PBGC to extend this program to terminating 401(k) and other plans, but the PBGC has not yet issued regulations extending the program.
Previously, the IRS encouraged use of its letter forwarding services by providing that either the IRS or Social Security Administration service would be deemed a “reasonable” way to locate missing individuals owed a benefit for a plan correction under its Employee Plans Compliance Resolution System (EPCRS). It is expected that employers will now use the Social Security Administration letter forwarding service instead to make such corrections. The Department of Labor has also suggested other options to locate missing plan participants, including internet search tools, commercial locater services and credit report agencies.