Plan officials have a fiduciary responsibility tomaintain accurate census data and to ensure that ALL participants entitled to a pension distribution receive their benefit. The U.S. Department of Labor (the Department) has issued guidance which will facilitate fulfillment of these responsibilities. Many plans have implemented procedures aimed to fulfill these duties. But what are plan officials to do when despite efforts they are unable to fulfill their fiduciary responsibilities? The answer is Skip Tracing.
Fiduciaries are responsible for filing correct Form 5500 Reports and maintaining accurate census information. In the event plan census data is not up to date and does not accurately reflect a participant's viability the Plan runs the risk of issuing payments to individuals not entitled to these benefits. This costs the plan money and results in inaccurate funding calculations and increased PBGC premiums.
Many pension plans utilize the Social Security Death Master File (DMF) to monitor participant viability. However, this information is not complete.
To mitigate this situation plan officials often require retirees to submit notarized forms attesting that the individual is indeed alive.However, the Department has recently determined that this procedure is imprudent as it places an undue hardship on retirees. Skip Tracing will ensure the plans pay benefits only to living retirees.
Plan fiduciaries are required to inform participants and beneficiaries of plan updates and current plan funding status on an annual basis. Fiduciaries are also charged with ensuring participants and beneficiaries receive notice of their benefit distribution options in advance of the participant reaching their normal and mandatory retirement dates. If these notices are returned as undeliverable these individuals are coded as missing. Often plans will then utilize an independent search engine to locate these individuals. If this information proves incomplete the participant remains coded as missing. Fiduciaries are required to perform due diligence to locate these individuals. Skip Tracing will ensure the plan maintains updated accurate census data that will guarantee participants receive notice of their benefit distributions.
Of particular concern to the Department are those individuals who have reached their mandatory retirement age that are not in pay status. IRS taxes these undistributed amounts at 50%. Often this population is not locatable through search engines as they are living with relatives or are in long term care facilities. Skip Tracing is the only means of locating these individuals.
In summary Skip Tracing is the only means to ensure plan officials apply with their fiduciary responsibilities to ensure accurate census data and provide participants with their benefit distributions.