Different contributor here. Please permit me to assist.
Unless a qualified retirement plan (401(k), etc.) has distributed all of its assets, it is not terminated for purposes of its ongoing liabilities. Filing a final 5500 form does not terminate the plan.
The trustee must make reasonable efforts to locate missing participants. Minimum efforts are (all of the following):
- Use Certified Mail. Certified mail is an easy way to find out, at little cost, whether the participant can be located in order to distribute benefits. The Department provided a model notice that could be used for such mailings as part of a regulatory safe harbor (discussed below), but its use is not required and other notices could satisfy the safe harbor.(11)
- Check Related Plan and Employer Records. While the records of the terminated plan may not contain current address information, it is possible that the employer or another of the employer’s plans, such as a group health plan, may have more up-to-date information. For this reason, plan fiduciaries of the terminated plan must ask both the employer and administrator(s) of related plans to search their records for a more current address for the missing participant. If there are privacy concerns, the plan fiduciary engaged in the search can request that the employer or other plan fiduciary contact or forward a letter for the terminated plan to the missing participant or beneficiary. The letter would request that the missing participant or beneficiary contact the searching plan fiduciary.
- Check With Designated Plan Beneficiary. In searching the terminated plan’s records or the records of related plans, plan fiduciaries must try to identify and contact any individual that the missing participant has designated as a beneficiary (e.g., spouse, children, etc.) to find updated contact information for the missing participant. Again, if there are privacy concerns, the plan fiduciary can request that the designated beneficiary contact or forward a letter for the terminated plan to the missing participant or beneficiary.
- Use Free Electronic Search Tools. Plan fiduciaries must make reasonable use of Internet search tools that do not charge a fee to search for a missing participant or beneficiary. Such online services include Internet search engines, public record databases (such as those for licenses, mortgages and real estate taxes), obituaries and social media.
If location is not successful, then:
1. Rollover each missing participant's account funds into an IRA account (best);
2. Open an FDIC-insured savings account for each participant (okay, but the participant will owe taxes on the distribution); or
3. Send the remaining account assets to your State's Unclaimed Property Fund (same as #2).
From your facts, it appears that your plan has remained active, which means that you would have to file Form 5500 for each tax year that has passed since the last form filing. However, before filing the forms, you need to dispose of the remaining account assets, as previously described.
Now, you may be thinking, "Paychex is the trustee, why the h*** didn't they do all of this?" This question I cannot answer. It may be (probably is) due to the contract you signed with Paychex to hire them as plan trustee. I'd have to review that contract. However, there's nothing to prevent you from terminating the agreement, making yourself, trustee, taking control over the plan account, and then doing all of the above that I've just described.
I'm assuming that the goal here is that you don't want to pay Paychex for the cost of all this administrative stuff. One thing that I would probably assert, were I representing you as a lawyer, is that Paychex should have done all of the above, so that your final form 5500 would have been valid. Therefore, Paychex is liable for any penalties levied on you by the IRS. So, if it turns out that the penalties are more than the cost of hiring legal counsel, you may want to, at least, hire a lawyer to write a demand letter, and try to settle on a resolution of the penalty issue.
I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, I receive nothing for my efforts in your behalf.
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