Advisors, take note: the Internal Revenue Service has released a new ruling on the handling of missing 401(k) participants.
Revenue Ruling 2020-24, Withholding and Reporting With Respect to Payments From Qualified Plans to State Unclaimed Property Funds, is “a good heads up … to advisors who may know of clients who left 401(k) balances behind with former employers,” IRA expert Ed Slott of Ed Slott & Co., told ThinkAdvisor in a Wednesday email. “Those unclaimed balances may be lost to the state.”
The IRS guidance, released in mid-October, addresses retirement plan participants “who are due a benefit but cannot be located,” Slott explained.
“In the past, plan administrators may have wanted to turn over a missing participant’s benefit to a state unclaimed property fund (i.e., escheat the benefit), but were unsure of their withholding and reporting obligations.”