The Department of Labor (DOL) announced today that its Employee Benefits Security Administration will publish interim final rules and an amendment to a prohibited transaction class exemption. These changes aim to better protect workers' retirement savings by facilitating the distribution of assets from bankrupt companies' retirement plans by Chapter 7 bankruptcy trustees.
The amendments to the agency's Abandoned Plan Program allow these trustees to use the program to terminate, wind up, and distribute benefits. The program, adopted in 2006, provides streamlined procedures for terminating and distributing benefits from individual account retirement plans like 401(k)s that sponsoring companies have abandoned. It allows benefits to be distributed while significantly reducing fees charged to participants' accounts for annual reporting, legal compliance, and other administrative services.
Previously, 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. Now, with access to the program's streamlined process, these trustees can more efficiently wind up a bankrupt company's retirement plan.
In addition, EBSA has amended an associated prohibited transaction class exemption, PTE 2006-06. This amendment permits Chapter 7 bankruptcy trustees and their designees to select and pay themselves for services related to terminating and winding up bankrupt companies' retirement plans.
Assistant Secretary for Employee Benefits Security Lisa M. Gomez stated: "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." She added that these changes would expedite the delivery of promised retirement savings into workers' hands more efficiently.
Furthermore, DOL has introduced a new optional online method for submitting required notices to EBSA. This system is designed as a supplement to existing email and paper-based systems and will be available on the agency's website after its launch.
"The online filing system will make it significantly easier to participate in the program," Gomez added, "and helps ensure that retirement plans accomplish their core mission of paying benefits to their participants and beneficiaries."
The interim final rules and amended exemption will be available to Chapter 7 bankruptcy trustees as of July 16, 2024. The department is currently seeking comments on the interim final rules, with a deadline for submission set for July 16, 2024.
