Goodbye IRS Letter Forwarding Program
The Internal Revenue Service just issued a Revenue Procedure revising the scope of the IRS letter-forwarding program: the IRS will no longer forward letters on behalf of plan sponsors or administrators of qualified retirement plans (including qualified termination administrators of abandoned plans), who are attempting to locate missing plan participants and beneficiaries.
This change is due to the numerous alternative missing person locator resources, including the Internet, that have become available. The IRS believes these alternatives do as good of a job, or better, in assisting a plan sponsor or plan administrator in locating a missing participant or beneficiary. This is a critical issue when a qualified plan owes a retirement benefit to a beneficiary and cannot locate the recipient.
In particular, this change affects retirement plan sponsors and administrators who are searching for plan participants or beneficiaries in order to correct failures that require payment of additional benefits in accordance with the Employee Plans Compliance Resolution System (EPCRS). The IRS intends to provide an extended correction period for plan sponsors and administrators affected by this change in the letter-forwarding program.
Even though there are procedures outlined for finding lost participants, it is more important to have a distribution processing policy in place to promptly pay out terminated participants with de minimis plan account balances, as soon as administratively feasible and in accordance with the employer’s plan document. Once a participant is deemed to be “lost” the steps involved can not only be cumbersome but time consuming as well.