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PSCA Executive Reports

October 31, 2017

Internal IRS Memo Announces Safe Harbor Audit Policy on Missing Participants

Earlier this month, the Acting Director of the Employee Plans Exam Division announced a policy intended to promote consistent enforcement of the age 70 1/2 minimum distribution requirements (“MDR”) in the context of “missing participants.”  It is obviously difficult for plan administrators to satisfy MDR rules where they are unable to locate the participant.  IRS examiners have pursued different approaches in this area, sometimes seeking monetary sanctions against a plan administrator who has not made reasonable efforts to locate missing participants.     

Under the memo dated October 19, IRS auditors will not challenge plans where the plan administrator:

  • searched for alternative contact information in plan, plan sponsor and publicly-available records,
  • used a commercial locator service, credit reporting agency or a proprietary internet search tool for locating individuals, and
  • sent mail via United States Postal Service (USPS) to the last known mailing address and attempted contact “through appropriate means for any address or contact information,” which includes email addresses and telephone numbers.     

The guidelines apply to all EP audits open on and after October 19, 2017.

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