It’s hard to believe, but sometimes, there are uncashed 401(k) distribution checks – and for plan sponsors, this can be a real headache.
Every year, participants move on, leave jobs and then disappear. And when the 401(k) distribution checks are sent, they simply go uncashed. No big deal right? Wrong!
The Department of Labor requires plan sponsors to do what is called “reasonable search steps” to find participants.
How can people walk away from this cash? It’s hard to say, but it does happen. With more than 30 million forgotten or missing accounts. That’s more than $2 trillion dollars!
But life events such as death, moves and job changes can play in, meaning the federal government established the Retirement Savings Lost and Found database in SECURE 2.0. This is to help participants find their lost accounts.
This means plan sponsors need to find processes that can help reunite participants with their benefits. So, what can be done?
The Department of Labor recommends these best practices:
- Determine how many missing participants there are
- Regularly monitor participants, especially terminated ones or those who leave their jobs
- Keep accurate records of returned mail
- Make a list of uncashed checks
- Take immediate action to remedy these issues
Keeping current lists of contact information is also critical, regularly confirming these addresses, emails and phone numbers.
There are also steps to take, including sending certified mail, contacting beneficiaries, reviewing other company records such as health care or retirement and regularly searching for participants.
The key is to put this process in place now – before an audit is triggered.
Do you still have questions?
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If you have other questions about retirement plan loans, email us or call 937.308.0758.
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