In 1945, as World War II raged, the Social Security Administration (SSA) began its letter forwarding program. But times and technology change, and the SSA retired the program for good on May 19, 2014. The IRS retired its routine letter forwarding program in 2012.
The end of these two programs may put you in a bind if you need to contact former employees about final checks or 401(k) plan distributions and you don’t have their current addresses. (79 F.R. 21831, 4-17-14)
Final pay. You can’t just hold onto a former employee’s final paycheck and eventually return it to the company’s general accounts. A final paycheck that can’t be delivered to a former employee within state-mandated deadlines is considered abandoned property, which reverts to the state. But even state abandoned-property laws require you to do due diligence and try to find the employee. Tip: Consult your state treasurer’s website for what to do with abandoned paychecks.
Instead of the SSA’s letter forwarding service, you can use Web-based alternative missing persons locators, some of which are free. You can always fall back on the tried-and-true method of mailing a letter via certified mail.
401(k) plan assets. The tax code makes provisions for orphaned 401(k) plan assets. 401(k) plans that require distributions to departing employees who have 401(k) balances of less than $5,000 must roll over those balances directly into plan-designated IRAs, if employees didn’t provide distribution instructions, their accrued balances exceed $1,000 and they can’t be located. Plan-initiated rollovers apply to all mandatory distributions exceeding $1,000, including distributions to former employees whose balances exceed $5,000, which normally require their consent prior to distribution.