Interim rules open Abandoned Plan Program eligibility to Chapter 7 bankruptcy trustees
WASHINGTON –The Department of Labor today announced its Employee Benefits Security Administration will publish interim final rules and an amendment to a prohibited transaction class exemption that better protect workers’ hard-earned retirement savings by making it easier for Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies’ retirement plans.
The changes amend the agency’s Abandoned Plan Program to allow these trustees to use the program to terminate, wind up and distribute benefits. Originally adopted in 2006, 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. The program allows benefits to be distributed and helps reduce substantially the fees charged to participants’ accounts for annual reporting, legal compliance and other administrative services, such as termination costs.
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. Using the program’s streamlined process, these trustees can now reduce the time and resources needed to wind up a bankrupt company’s retirement plan.
EBSA has also 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.
“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.”
In addition, the interim final rules announce a new, optional online method to submit required notices to EBSA to supplement existing email and paper-based systems. Following its launch, the online system will be available on the agency’s website.
“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 interim final rules and amended exemption make the Abandoned Plans Program and related exemptive relief available to Chapter 7 bankruptcy trustees as of July 16, 2024.
The department is seeking comments on the interim final rules. Comments are due July 16, 2024, which is 60 days after Federal Register publication.
Read the interim final rules and amendment to PTE 2006-06.
