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Thursday, October 4, 2012
As of August 31, 2012, the IRS no longer provides letter-forwarding services on behalf of plan sponsors or administrators of qualified retirement plans to locate missing participants who may be entitled to retirement plan payments. In Revenue Procedure 2012-35, 2012-37 I.R.B. 341, the IRS announced that the letter-forwarding program is now limited to situations that serve a "humane purpose" - defined as situations in which a person is attempting to locate a missing person to convey a message of an urgent or compelling nature, or due to an emergency situation. The IRS reasoned that, due to the advent of alternative missing person locator resources, including the Internet, it no longer considered locating missing plan participants to be a humane purpose warranting use of its letter-forwarding program.
Sponsors and third-party administrators of qualified retirement plans previously used the IRS letter-forwarding service to search for missing plan participants when correcting qualification errors under the Employee Plans Compliance Resolution System that required payment of additional benefits. The IRS has stated on its website that it intends to provide an extended correction period for plan sponsors and administrators affected by its program change.
While the IRS letter-forwarding service is no longer available, a number of methods remain that can be used to locate missing participants or beneficiaries, including commercial locator services, credit reporting agencies, and the Social Security Administration's letter-forwarding program. Although the elimination of the IRS letter-forwarding service isn't likely to be a major burden to most plan administrators, the IRS service was free for 49 or fewer requests. The Social Security Administration's letter forwarding program, on the other hand, costs $25 per letter.
Does your company use the Internet to conduct its search for missing participants? Which methods do you prefer? And what do you think about the IRS's puzzling position that reuniting taxpayers with financial assets isn't a humane purpose worthy of IRS action?
--Shaun Terrill
Federal Tax Law Editor (Compensation Planning)
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