Plan recently terminated and paid out all participants save one. The lone holdout is actually a participant who died several years ago. There is no beneficiary designation and the participant's estate was not probated. The Plan sponsor has tried to find heirs to the participant with no luck. The participant's account is in the range of $400. What can the Plan Sponsor do?

DOL's FAB 2004-2 (http://www.dol.gov/ebsa/regs/fab_2004-2.html) will give you some guidance with regard both to locating the individual's heirs and to making the final distribution.

Ultimately, this could depend on plan provisions. If you have not been able to locate family members, your document might permit a forfeiture of the account, but re-allocating and distributing once again following what were to have been final participant distributions likely will be a royal pain. You could use the account balance to pay administrative expenses (if the plan allows trust assets to be so used), which may be the easiest. Or, you could open an IRA or escheat to the state--excheat may be the best chance of getting the $$ to the heirs (if any).

First, in the absence of a designation of death beneficiary, who specifically does the plan say shall be the default death beneficiary? Often, it is surviving spouse. If none, then children. Then estate, or parents and then estate.

Second, you should make sure you have documented in your files on the plan what would be a good faith reasonable effort to locate the default beneficiary. I think that given that only $400 is involved, reasonable effort does not require as much as if there were, say, $10,000 in the account.

You could consider running a one-time ad in the newspaper of the locale where the individual lived or in the state bar's periodic magazine, trying to locate 'lost heirs'.

If yet the default beneficiary cannot be identified--perhaps it is the estate and such has not been filed--then you might next pay the money over to the state's unclaimed funds (i.e., escheat).

Keep in mind, the plan is not fully terminated until the last assets titled in the trust/trustees names is paid out, and the final Form 5500 is due 7 months from that date.