A recurring challenge for employers is trying to locate plan participants that have long since terminated employment, but that are just now entitled to start receiving their retirement plan benefits.  Since 1994, the Internal Revenue Service has made available to plan sponsors a letter forwarding service to help locate missing plan participants.  The program was fairly simple to use, and was free of charge.  It was also reasonably effective in locating missing plan participants.
However, the IRS recently updated its letter-forwarding program, and under the updated program, which went into effect on August 31, 2012, the IRS no longer allows employers to use the service as a means to locate participants entitled to benefits under their retirement plans.  While the service has been a helpful tool for retirement plan administrators since 1994, the IRS now reserves this program only for emergency situations.
As a result of this change, employers utilizing this service for locating missing plan participants should evaluate their administrative procedures and determine what alternative methods will be used.  The Social Security Administration letter forwarding service, the use of internet search tools, commercial locator services, and credit reporting agencies are examples of acceptable, alternative methods of locating missing plan participants.
Keep in mind, expenses incurred to locate a missing individual may be charged to the participant’s account as long as the amount of the expenses allocated to the account are reasonable and the method of allocation is consistent with the terms of the plan and the plan fiduciary’s duties under ERISA.  If the cost of using participant location services will be charged to the missing individual’s account, plan administrators need to consider the size of the participant’s account balance in relation to the cost of the services when deciding whether or not to use the service.