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Cashouts: Locating Missing Participants

Most defined contribution retirement plans contain a “cashout” provision that allows the plan sponsor to pay out retirement savings to workers who end their employment with less than $5,000 in their account. These forced cashouts can help reduce the staff burden and costs associated with keeping track of former employees in order to administer their accounts and deliver benefit statements and other notices.

Under the cashout rules, if a former employee does not provide distribution instructions and has an account balance between $1,000–$5,000, the plan sponsor must automatically roll over the account to an IRA established for the former employee. Balances up to $1,000 may be either rolled over to an IRA or paid directly to the former employee, depending on the terms of the plan document.

Plan documents may allow for cashouts under $1,000 to be automatically rolled over if a former employee does not make a distribution election, but some plan documents reserve automatic rollovers only for balances between $1,000–$5,000. This means that the plan sponsor must distribute balances under $1,000 directly to the former employee. If a distribution check is returned as undeliverable or is never cashed, the plan sponsor retains fiduciary responsibility for those plan assets and must take reasonable measures to locate the missing participant. Many plan documents include specific steps that must be taken to search for missing participants. If a plan document does not include search procedures, plan sponsors should develop a written policy addressing the steps they will take to locate missing participants and what they will do with the account balance if they are unsuccessful.

Best practices for locating participants with balances under $1,000

Whether a fiduciary has been diligent in trying to locate a missing participant and prudent in disposing of the unclaimed assets will be judged based on facts and circumstances (e.g., size of account balance, costs related to the search efforts). If the plan document does not contain search procedures, plan sponsors should develop a policy for locating missing participants that includes:

  • Time frames for cashing out former employees after severance from employment and for taking additional measures if a distribution check is returned or remains outstanding
  • The search methods that will be used to locate missing participants
  • Steps that will be taken if search methods are unsuccessful


The Department of Labor (DOL) provides guidance for locating missing participants for retirement plans that are terminating. Although the DOL’s guidance applies only to terminating plans, these same principles are a good starting point for building policies and procedures for active plans

  1. Use certified mail to the last known address
  2. Check related plan and employer records for alternate contact information
  3. Check with the designated plan beneficiary for more information
  4. Use free electronic search tools (e.g., search engines, public databases, social media)


To reduce the likelihood of missing participant balances, plan sponsors may also want to include the following steps in their employee exit process:

  • Confirm the employee’s home address, email and phone number
  • Provide an explanation of the distribution and taxation options (e.g., 402(f) notice)
  • Review with the employee plan account access instructions and electronic communication options
  • Complete cashout within a reasonable time after an employee’s separation to help avoid the “missing” participant issue


Start Here

Plan sponsors must follow the plan document terms for forced cashouts, automatic rollovers, and locating missing participants to maintain compliance.

If the plan document does not contain specific search methods, the plan sponsor should develop procedures to meet their fiduciary responsibilities associated with locating missing participants.

Financial advisors can help a plan sponsor review the plan’s cashout provisions to make certain the plan’s requirements are being met. A financial advisor and other plan service providers can also help plan sponsors develop procedures for locating missing participants.


1 DOL Field Assistance Bulletin 2014-1, Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans, August 14, 2014