The U.S. Department of Labor (DOL) today announced it is expanding its rules and pushing forth an amendment that would better protect the retirement savings of employees who worked for bankrupt companies.
Specifically, the changes would make it easier for Chapter 7 bankruptcy retirees to distribute assets from bankrupt companies’ retirement plans using the Abandoned Plan Program, a service originally adopted in 2006 that allows trustees to “terminate, wind up, and distribute benefits,” the DOL said.
Before these regulatory updates, Chapter 7 bankruptcy trustees were ineligible to use the Abandoned Plan Program, despite being responsible for administering retirement plan functions on behalf of bankrupt entities.
The program includes streamlined procedures for the termination and distribution of benefits from individual account retirement plans, such as 401(k) plans, that their sponsoring companies have abandoned. According to the DOL, it also allows benefits to be distributed and helps reduce fees charged to participants’ accounts for annual reporting, legal compliance and other administrative services, such as termination costs.
“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,” explained Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “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.”
The Employee Benefits Security Administration (EBSA) also announced it had amended an associated prohibited transaction class exemption, PTE 2006-06, to permit Chapter 7 bankruptcy trustees and their designees to select and pay themselves for services in connection with terminating and winding up bankrupt companies’ retirement plans.
Along with the interim final rules, trustees will be able to use a new, optional online method to submit required notices to EBSA to supplement existing email and paper-based systems.
The Abandoned Plans Programs and related exemptive relief will be available to Chapter 7 bankruptcy trustees starting July 16. The DOL is welcoming public comments until then, which will be 60 days after it is published on the Federal Register.
SEE ALSO:
- DOL Fiduciary Rule Hit With First Lawsuit
- House, Senate Resolutions Introduced to ‘Disapprove’ DOL Fiduciary Rule
- DOL Final Fiduciary Rule Released, Set to Become Effective in September
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
