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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.
Until now, retirement plan sponsors have frequently used the IRS
letter forwarding service as a way to locate missing participants
or beneficiaries to whom benefits are owed under a retirement
plan. Following this discontinuance, plan sponsors will need
to utilize another more expensive government forwarding service or
utilize internet search tools, commercial locater services and
credit report agencies to locate missing retirement plan
participants.
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 $25 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.
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