IRS Changes Letter-Forwarding Program

September 2012Newsletters For Your Benefit

On August 31, 2012, the IRS issued guidance revising its letter-forwarding program, which has long been available to assist a plan sponsor or plan administrator in locating missing participants or beneficiaries of qualified retirement plans. These services were often utilized to contact individuals to whom a retirement benefit was to be paid and also integrated into the IRS’ correction program under the Employee Plans Compliance Resolution System (EPCRS) as an available mechanism to contact missing participants or beneficiaries affected by the correction of a qualified plan error or defect.

The IRS has cited the readily available resources found through the internet as one of the driving forces behind the change. Going forward, the IRS will continue to operate the letter-forwarding program for situations in which a person is trying to locate a taxpayer to convey a message for a humane purpose (defined to mean a situation in which a person is seeking to find a missing person to convey a message of an urgent or compelling nature) or because of an emergency situation.

As noted above, retirement plan administrators and professionals have long relied on the letter-forwarding service to locate missing participants or beneficiaries in connection with a voluntary correction under EPCRS. The IRS will continue to make the letter-forwarding program available to plan sponsors that have submitted a proposed correction postmarked by August 31, 2012; however, submissions postmarked after August 31, 2012, will have to be revised to reflect the fact that the letter-forwarding program is no longer available. It is also expected that the next iteration of EPCRS, or some guidance related to it, will include an extended correction period for plan sponsors and plan administrators affected by the recent change.

Plan sponsors and administrators should note that several readily available options already exist to locate missing participants, including the Social Security letter-forwarding program, services offered by credit reporting agencies and, as noted above, search services found on and through the internet, many of which can be used for free or minimal cost.

For more information regarding this topic, please contact Seth I. Corbin or any member of Fox Rothschild's Employee Benefits & Compensation Planning Practice Group.