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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10161
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am terminating my Profit Sharing Plan (small law firm) and

Customer Question

I am terminating my Profit Sharing Plan (small law firm) and have 5 employees in the plan. What happens if we can't find one or more of the employees? I retired in 2006 so all ee's went to other jobs and may not be able to contact some. Since employment ended in 2006 do I have to distribute income that was earned by the Plan after 2006? I made no contributions of any nature after 2006 and I made all contributions before that date.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

...

The Pension Benefit Guarantee Corp's Missing participant program was created by the Retirement Protection Act of 1997, ... to provide a way for distributing plan benefits to participants and beneficiaries who cannot be located in plans terminating in a standard termination or in a distress termination where the plan was sufficient for all guaranteed benefits. (See Section 4050 of ERISA and 29 CFR Part 4050)

...

AS it sounds like you may know, an employer choosing to terminate a fully funded pension plan must distribute all plan benefits to participants and beneficiaries before completing the plan's termination.

...

If you can't find a participant or beneficiary after a diligent search (see the recommended methods below) you must either purchase an annuity from a private insurer in that person's name and provide information on the missing person and insurer to PBGC or transfer the value of the person's benefit to PBGC's Missing Participants Program.

...

Here's the IRS guidance on locating participants:

...

Plan sponsors, administrators and qualified termination administrators (QTAs) sometimes need to locate missing participants or beneficiaries. For example, correction of a plan failure under the Employee Plans Compliance Resolution System (EPCRS) may require payment of additional benefits to terminated participants. See Revenue Procedure 2013-12, Section 6.02(5)(d), for plan correction principles relating to lost participants.

Previously, the IRS provided letter-forwarding services to help locate missing plan participants, but with the August 31, 2012, release of Revenue Procedure 2012-35, the IRS stopped this letter forwarding program. The IRS will no longer process requests to locate retirement plan participants or beneficiaries.

In the absence of IRS letter forwarding services, sponsors, administrators and QTAs may use a variety of other methods to locate missing participants and beneficiaries, including:

Department of Labor guidelines
The Department of Labor in Field Assistance Bulletin No. 2014-01 lists the following search methods as the minimum steps the fiduciary of a terminated defined contribution plan must take to locate a participant:

  • Send a notice using certified mail
  • Check the records of the employer or any related plans of the employer
  • Send an inquiry to the designated beneficiary of the missing participant
  • Use free electronic search tools

...

Once you've documented that you've made a diligent search...

...

Here are the forms you'll need

  • Missing Participants Filing Instructions [PDF]
  • Schedule MP [PDF]

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And here are the addresses for ending the Schedule MP and the check, respectively

...

Processing and Technical Assistance Branch

*****NW

Washington, DC###-##-####/p>

(Do not send payments with these forms)

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If using the U.S. postal service, the payment for designated benefits and/or other amounts with a completed payment voucher must be sent to:

Pension Benefit Guaranty Corporation

P.O.Box 979114

St. Louis, MO###-##-####/p>

...

Finally, (may be stating the obvious here) but if you have not done the accounting to allocate amounts to individuals, you may want to contact the firm that helped you set this up, OR the services of an an actuary that works in this area.

...

Hope this has helped

...

Lane

.

Customer: replied 1 year ago.
Very good response!! Need one more question. Charge to the AmX for this one also. Fired ee for thirty of 12k. She has balance in her account of 5k. Can I repay the firm with her funds?? Thanks. Nolan. I'm
Expert:  Lane replied 1 year ago.

You'll have to look to the plan document... sometimes there are conditions to vesting ... OR she may not have vested simply because of length of time there.

...

But you should read the vesting language in the plan document and apply it literally or you may have DOL (under ERISA) questions.

...

Don't shoot the messenger :0)

...

Lane

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