Q: Our plan includes several 401(k) accounts with small balances that belong to former employees. We'd like to contact the employees to encourage them to take action on their accounts, but we don't know where they live. What are the acceptable methods for locating them?
As fiduciaries, plan sponsors must treat all accounts-whether they belong to current employees, former employees, or employees' beneficiaries-with prudence and care. That said, there is some good news! The DOL, in its
Field Assistance Bulletin 2014-01
, provides guidance on searching for missing retirement plan participants. You may:
* Use certified mail. Certified mail is an easy way to find out, at little cost, whether a participant can be located.
* Check related plan and employer records. Although the records of the retirement plan may not contain current address information, the employer or another of the employer's benefit plans, such as a group health plan, may have more up-to-date information.
* Contact a designated plan beneficiary. Search the plan's records or the records of related benefit plans to try to identify and then contact any individual whom the missing participant has designated as a beneficiary (e.g., a spouse, child, sibling) to inquire about updated contact information for the missing participant. If there are privacy concerns, the plan fiduciary can request that the designated beneficiary contact the sought-after individual or forward a letter to the missing participant or beneficiary.
* Use free online search tools. Plan fiduciaries may make reasonable use of online search tools that do not charge a fee to search for a missing participant or beneficiary. Such services include Internet search engines, public record databases (e.g., license, mortgage, and real estate tax databases), obituaries, and social media.
If the above methods fail to turn up the information needed, plan sponsors may use additional resources, including commercial locator services, credit-reporting agencies, information brokers, investigation databases, and analogous services that may involve charges.
Q: I've been told that our retirement plan is required to purchase something called a fidelity bond. What is it, and why do we need it?
A: ERISA requires a fidelity bond for employee benefit plans, including workplace retirement plans. The fidelity bond protects the plan from losses due to fraudulent or dishonest actions conducted by those within the company who handle the plan's funds (e.g., payroll associates, plan trustees, corporate finance personnel).
A plan's fidelity bond must provide coverage equal to no less than 10 percent of its assets, but at least a minimum of $1,000 and at most a maximum of $500,000. Because plan assets fluctuate, it's important for retirement plan sponsors to review their plans' fidelity bond coverage annually to ensure that it remains adequate.
Please note: It is also important to understand what a fidelity bond does not do. It does not insure fiduciaries against losses due to their breach of fiduciary responsibilities!