Terminated Employees Can Be Toxic to the Health of Your Plan uses LaRue v. DeWolff, Boberg & Assoc. Inc., No. 06-856 (Feb. 20, 2008) as an example of why plans should act quickly to move the accounts of terminated participants out of the plan. It stresses the fiduciary responsibilities that apply to both current and terminated participants:

"This applies to all participants, including those who are no longer employed by the company," he says. "Inactive participants are entitled to documents such as new Summary Plan Descriptions (SPD), material modifications to the SPD, the Summary Annual Report, notice of all IRS filings, participant statements, and if requested, the Plan document and the entire Form 5500." Every investment and provider change, including fund replacements, additions, or deletions, must also be communicated.

The article asserts that the PPA will increase the number of terminated participants with account balances, ultimately increasing the expense and risk of the plan. It suggests using plan advisors to provide advice and safe harbor IRA rollovers as ways to proactively minimize the risk.

"Plan advisors should seize this opportunity to provide education and objective, qualified help as well as access to a variety of quality IRA products that are appropriate retirement savings vehicles. In addition, it's prudent to rollover the assets of retiring or terminating participants and roll-out the accounts of former employees into safe harbor IRAs. These steps will keep plan participants invested in retirement and help advisors and their sponsors lower plan costs, reduce administrative headaches, and lessen liability exposure."

Some of these issues are not applicable to ESOPs. In addition, ESOPs must consider additional issues like the future repurchase obligation. Nonetheless, the article provides a good discussion of some of the fiduciary responsibilities that remain for terminated participants.