How to handle unclaimed funds when benefits are issued is a common issue for pension plans. In general, fiduciaries must establish and follow a prudent, documented process to protect a person’s money and meet their fiduciary requirement when dealing with unclaimed funds. In particular, this includes uncashed checks. In recent years, the subject has garnered the attention of Department of Labor and IRS auditors. In this paper, we discuss:

• Best practices: Thoughts on regular reports, participant outreach, direct deposit, tax and regulatory obligations, and escheatment requirements.
• Plan derisking: A review of constructive-receipt rules under Pension Benefit Guaranty Corporation regulations.
• Issues: Potential problems such as data gaps, time intensiveness, international relocation, fraud exposure, administrative costs, regulatory and litigation pressures, and working with vendors.
• Proactive plan: Insights such as consolidating information into a single system, adding automated alerts, having an effective missing-participant policy, weaving in participant education, and partnering with a reliable third-party search firm.

This article was originally published by the Plan Sponsor Council of America. Read the full article here.