A Missing Participant IRA is established for an employee with an account balance or accrued benefit that has terminated employment but failed to provide the employer with a forwarding address. A Default Participant IRA is established for an employee with an account balance or accrued benefit of greater than $1,000 but less than $5,000, who has terminated employment but has failed to respond to the employer’s request for payout instructions.
It’s important to note if the safe harbor provisions are complied with, the individual is no longer a participant in the plan after the rollover. Once rolled-over, plan fiduciaries are no longer responsible for the funds. Since the plan terms are no longer applicable, any beneficiary designation also may end when the rollover is made.
This net effect of all this is that it is now possible for a state government custodian to ultimately get possession of what was once an ERISA-protected retirement benefit, which would not otherwise be subject to local escheat.