I have a client with approximately 9,000 "lost" participants with accrued benefits of less than $10. All have had checks issued via force-out and returned so they are in a "outstanding check" status. Can anyone describe for me the legal requirements for handling these? My client operates in Minnesota - I haven't had a chance to look up their escheatment rules - I'm thinking that is their only option.

Thanks for your input.

IF this is a DC plan why not just forfeit the benefits subject to reinstatement if the participant shows up at a later date. See. Reg. 1.411(a)-4((b)(6). Just amend the plan to provide for forfeiture. Or you could just make a distribution of 100% as withholding to the IRS but why give up the funds?. DB benefits are to be turned in to the PBGC.

But beware that regulation technically only applies to participants who are truly lost.

Thanks - didn't even think about that reg. Appreciate the idea. I'll research further.

Would this work? Charge each person $10 for processing the check?

I have an idea similar to Lynn's. Amend the plan so the annual/SA/quarterly/monthly per-participant recordkeeping fees come from plan assets. These $10 accounts would be wiped out in short order.

As to charging fees to the participant accounts, remember that even though the DOL thinks it's okay to charge terminated participants but not active ones, the IRS doesn't seem to agree.

Take a look at IRS Revenue Procedure 2003-44 Section 6.02 (5)(b) and see if that applies to your plan.

http://benefitslink.com/IRS/revproc2003-44.shtml