The Department of Labor has announced updates aimed at improving the distribution of retirement plan assets to workers and retirees from bankrupt companies.
One of the changes, announced today and set to take effect July 16, will allow Chapter 7 bankruptcy trustees to participate in the Abandoned Plan Program, facilitating a more efficient process for winding up and distributing benefits from retirement plans.
Originally adopted in 2006, the Abandoned Plan Program was designed to streamline the termination and distribution of benefits from individual account retirement plans, such as 401(k) plans, in cases where the sponsoring companies abandon them.
It also helps curb the fees levied on participants’ accounts for expenses related to annual reporting, legal and compliance services, and other administrative services including termination costs.
As part of its announced changes, the DOL is introducing interim rules for the program to include Chapter 7 bankruptcy trustees, who were previously ineligible despite their role in administering retirement plan functions on behalf of bankrupt entities.
Assistant Secretary for Employee Benefits Security Lisa M. Gomez emphasized the positive impact of these changes.
“By opening the Abandoned Plan Program to Chapter 7 bankruptcy trustees, the interim final rules we announced today will improve the process for winding up retirement plans,” Gomez said in a statement.
“These changes will get promised retirement savings into the hands of workers and their families more quickly and efficiently and fulfill the commitment their employer made to its plan participants,” she said.
The program's streamlined procedures are expected to significantly cut down on the time and resources trustees devote to managing the termination and distribution of benefits from abandoned workplace retirement plans.
In addition to expanding the Abandoned Plan Program, the DOL is amending a related prohibited transaction class exemption, PTE 2006-06, effectively permitting Chapter 7 bankruptcy trustees and their designees to select and pay themselves for services related to terminating and winding up bankrupt companies’ retirement plans.
The interim final rules also introduce a new optional online method for submitting required notices to the Employee Benefits Security Administration, supplementing existing email and paper-based systems.
“The online filing system will make it significantly easier to participate in the program and helps ensure that retirement plans accomplish their core mission of paying benefits to their participants and beneficiaries,” Gomez added.
The department has opened a 60-day comment period on the interim final rules, to end on July 16.
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