Peter Semler of Better Business Planning, Inc. reminds us that although employers are required to take all reasonable means to locate missing benefit plan participants, many find it next to impossible to do so. This creates concern that they are not satisfying IRS requirements, and subjecting themselves to potential civil an/or criminal sanctions, including personal liability for any losses suffered by a participant and fines ranging in the hundreds of dollars per day per participant for continuing failures to distribute required disclosures. For such employers, the IRS Letter Forwarding Program (the “Program”) provides relief.
The Program is available to individuals, companies and federal agencies. It may be especially useful to plan sponsors or administrators who are attempting to locate missing participants.
For requests that involve fewer than 50 missing participants, the IRS Disclosure Office can forward letters from plan administrators to missing individuals if the administrator provides the following information:
STEP 1: Prepare a cover letter directed to the IRS Disclosure Office for the local area where the requester is located. This cover letter should: (1) state why IRS assistance is being sought; (2) list the name, social security number, and last known address for each participant; and (3) include the name and address of the person or organization to whom the IRS should send an acknowledgment letter, limited only to acknowledgment of receipt of the sender’s correspondence and an indication of whether or not the matter has been accepted into the letter forwarding program. Inclusion of the correct social security number is mandatory since the IRS will not attempt to locate any individual without this information.
STEP 2: With your cover letter, include a letter (three pages or less) directed to the individual(s) who cannot be located. This letter should: (1) advise the recipient of the reason for the letter; (2) include instructions regarding what the recipient should do to contact the sender if he or she decides to respond; (3) make it clear a response to the sender’s letter is completely voluntary on the part of the recipient; and (4) include the following disclaimer statement, “In accordance with current policy, the IRS has agreed to forward this letter because we do not have your current address. The IRS has not disclosed your address or any other tax information and has no involvement in the matter aside from forwarding this letter. Your response to this letter is completely voluntary.” Upon receipt of a valid request, the IRS Disclosure Office will search its records under the social security number provided and, if an address is found, forward the letter using an IRS envelope. If an address cannot be found or the letter is returned by the Postal Service as undeliverable, the letter will be destroyed. The requester will not be notified of the letter destruction since the law does not allow the IRS to provide the sender of such letter with the results of its efforts.
For requests involving less than 50 recipients there is no charge. Each request should be sent to the attention of the Disclosure Officer at the IRS district office nearest the requester regardless of where the recipient last resided.
Requests involving 50 or more participants are processed separately for a charge. Charges may be obtained from the IRS Disclosure Office in Washington, DC at 202-622-3324. The mailing address for this service is: Internal Revenue IRS
Director, Office of Governmental Liaison & Disclosure
CL:GLD, Room 1603
ATTN: Disclosure Officer
1111 Constitution Ave., NW
Washington, DC 20224
Response time will depend upon the overall workload of the IRS Disclosure Officer.
Use of the National Registry is an alternative to the options given above. The Registry is a website where plan sponsors, plan administrator, custodians, or other plan service providers can register the names of missing plan participants who have unclaimed retirement funds. Individuals who think they may have old 401(k) accounts simply enter in their social security number and the database is searched for any nationwide matches. If there are any matches, the person is shown who the employer(s) is that has retirement money and is asked to provide your current contact information so the employer may contact them and make arrangements for distribution. Thanks to Pete for providing this useful guidance.