Missing Assets and Unclaimed Money

Missing Assets: Unclaimed Pension and Retirement Account Search

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Defined Contribution Retirement Plans - Unclaimed 401(k) Plans
401(k) Plans at Companies No Longer in Business
401(k) Plan Participant Involuntary Termination
Automatic IRA Rollovers for Non-Responsive 401k Participants

Missing Participant IRA - Default Participant IRA
Automatic IRA Rollovers for Terminated and Abandoned 401k Plans

Defined Contribution Retirement Plans - Unclaimed 401(k) Plans

Participants in defined-contribution retirement plans such as the 401(k), by virtue of the fact they own the underlying investments, are entitled to the funds when they switch jobs, and if their employers fail or otherwise cease operations. This differs from accrued benefits of employees with traditional defined-benefit pension plans, which are subject to the solvency of the employer and status of their employment.

A disproportionate share of the unclaimed 401k assets are owed family members of deceased employees who fail to claim pension benefits stemming from employment that may have ended years earlier. And the U.S. Department of Labor estimates each year tens of thousands of workers fail to claim or rollover $850 million in 401k retirement plan assets when they change jobs.

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Lost 401(k) Plans at Companies No Longer in Business

A common scenario for failure to claim 401k assets arises when former employees of closed or bankrupt companies are unable to locate their accounts, because their employers failed to provide for the administration of 401k plan assets when they ceased operations.

By statute, a designated individual from the former employer must approve any 401(k) rollover or disbursement. The fiduciary which manages the plan assets cannot release funds to the owner without this approval, which may be difficult to get when a company dissolves, because the designated company manager or other official cannot be found.

Larger companies often maintain administrative staff for months or years after insolvency to handle such matters, but smaller companies may not. About 2% of 401(k) plan assets - roughly $850 million own 33,000 workers - are 'orphaned' each year; held by a financial institution without an employer representative to oversee the plan.

Under the current system, the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor must identify a new fiduciary to oversee the plan before funds can be released. This process can be time consuming and costly. Special rules also apply where missing or non-responsive participants in active plans fail to claim their entitlements.

These rules - establishing Rollover IRAs for terminating and abandoned defined contribution plans, and for missing and non-responsive defined contribution plan participants, may cause retirement funds to lose their ERISA-qualified status, subjecting them to state escheat statutes when they go unclaimed.

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401(k) Plan Participant Involuntary Termination

While it is true retirement funds invested in 401k plans continue to earn interest and accumulate potential capital gains even after a business no longer exists, there is an important caveat. Even though benefits belong to the employee, plan administrators can terminate your further participation in the plan if you (or your heirs) fail to claim plan benefits or cash a benefit check.

The financial institutions holding unclaimed 401K assets - banks and brokerages appointed by the plan administrator - make little if any effort to locate lost employees and missing retirement plan participants, because by law their responsibility is to the company, not the employee. (Some lost participants may receive notice from the Social Security Administration, but only after reaching retirement age).

Automatic IRA Rollovers for Non-Responsive 401k Participants

When employees leave a company with a defined contribution retirement plan such as a 401(k), the majority rollover plan benefits to other tax-qualified accounts themselves. A significant number neglect to do so, however, allowing assets to remain in the plan after employment ends. The Economic Growth and Tax Reconciliation Act of 2001 (EGTRRA) amended the IRS code to allow plan sponsors to establish Rollover IRAs for missing and non-responsive plan participants with balances less than $5000.

In 2004, the U.S. Department of Labor published guidelines establishing safe harbor provisions for rollover distributions that would satisfy the plan sponsor's fiduciary responsibilities to participants under ERISA. The plan sponsor must provide information about the automatic rollover process in the Summary Plan Description (SPD) or Summary of Material Modification (SMM) given participants. They must enter into a written rollover agreement with an IRA provider stipulating the amount of the initial investment, as well as services to be provided, fees and expenses.

The rollover IRA must be established at a state or federally regulated financial institution, such as a bank or credit union, trust or insurance company. The IRA must be rolled over to an investment vehicle that preserves principal, minimizes risk and provides a reasonable rate of return while maintaining liquidity; such as an interest bearing savings account, certificate of deposit or money market fund. Fees and expenses cannot exceed those normally charged by the provider for comparable IRAs.  For assistance go to: Rollover IRA for Non-Responsive Participant


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Missing Participant IRA - Default Participant IRA

A Missing Participant IRA is established for an employee with an account balance or accrued benefit that has terminated employment but failed to provide the employer with a forwarding address. A Default Participant IRA is established for an employee with an account balance or accrued benefit of greater than $1,000 but less than $5,000, who has terminated employment but has failed to respond to the employer’s request for payout instructions.

It's important to note if the safe harbor provisions are complied with, the individual is no longer a participant in the plan after the rollover. Once rolled-over, plan fiduciaries are no longer responsible for the funds. Since the plan terms are no longer applicable, any beneficiary designation also may end when the rollover is made. This net effect of all this is that it is now possible for a state government custodian to ultimately get possession of what was once an ERISA-protected retirement benefit, which would not otherwise be subject to local escheat. For assistance go to: Rollover IRA for Missing Participant

Automatic IRA Rollovers for Terminated and Abandoned 401k Plans

Mergers, acquisitions and business closures often result in the termination or abandonment of employer retirement plans. Custodians are left holding assets without the authority to terminate plans or distribute benefits of so-called 'orphaned plans.' In response, the Employee Benefits Security Administration (EBSA) has established rules to provide for winding up the affairs of abandoned retirement accounts and the distribution of benefits.  

A plan is considered abandoned if no contributions to, or distributions from, have been made for a period of at least twelve consecutive months; and efforts to locate the plan sponsor have been unsuccessful because the entity no longer exists, cannot be located or is unable to maintain the plan.  EBSA regulations provide for the appointment of a QTA - Qualified Termination Administrator - to take custody of the dormant assets. The QTA is an eligible IRA custodian: bank, trust company, broker dealer or insurance company.

A Notice of ‘Intent to Terminate Plan’ is sent to the last known address of the plan administrator. The plan administrator has 30 days to appeal the termination. The QTA then files a 'Notification of Plan Abandonment' and 'Intent to Serve as Qualified Termination Administrator’ with the Department of Labor, which becomes effective in 90 days if no objection is made. A search is made for all plan participants, who are sent a ‘Notice of Plan Termination’ and given instructions on how to reclaim their funds. If owner reunification efforts prove unsuccessful, plan accounts may be transferred to a Rollover IRA. For assistance go to: Rollover IRA for Terminated Plan

401(k) Search Resources

Each year, pension and welfare benefit plans generally are required to file an annual report regarding their financial condition, investments, and operations. One way to track down plan administrators is to examine IRS Form 5500 filings, which are submitted annually to the Employee Benefits Security Administration (EBSA). To obtain a copy of your plan's Form 5500 contact:  U.S. Department of Labor  |  EBSA Public Disclosure Room  |  200 Constitution Avenue, NW, Suite N-1513  |  Washington, DC 20210

Penchecks, a provider of qualified plan benefit distribution to 401k plan administrators, maintains The National Registry of Unclaimed Retirement Benefits. Note this database contains only a fraction of accounts available for claim.

Another way to obtain contact information for a defunct company is to contact the registered agent. This information is available from the Secretary of State where the company does business or is legally domiciled. Search ‘Secretary of State – Corporations’ for your state, or contact NASS - National Association of Secretaries of State.

The EBSA - Employee Benefits Security Administration also maintains a database of abandoned plans, designed to help participants determine whether a particular plan is in the process of being, or has been terminated. If this is indeed the case, the name of the Qualified Termination Administrator (QTA) is provided. The EBSA maintains a database of Abandoned Plans at: askebsa.dol.gov   In situations where contact information cannot be obtained, contact EBSA  |  200 Constitution Avenue, NW |  Washington, DC 20210

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