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Administration July 19, 2024
DOL Launches New Online Filing System for Abandoned Plans
The system comes shortly after the DOL amended a rule to include Chapter 7 bankruptcies.
Reported by Alex Ortolani
The Department of Labor launched a new online system for qualified plan termination administrators to “more efficiently” submit information for individual account retirement plans, such as 401(k) plans, that have been abandoned.
The DOL’s Employee Benefits Security Administration announced the new system Friday to help administrators meet requirements under its Abandoned Plan Program. That program, started in 2006, allows benefit distributions to be made to participants and beneficiaries of retirement plans that have been abandoned by sponsoring companies. In 2024, the administration extended the program to companies in Chapter 7 bankruptcy, a change that took effect July 16.
The new system is designed to improve efficiency in administering abandoned plan benefits, which have previously only been done by email and paper-based communication.
“The online system now offers a user-friendly, one-stop platform that qualified termination administrators can use to submit information needed by our Abandoned Plan Program,” said Lisa Gomez, assistant secretary for employee benefits security, in a statement. “This new tool will facilitate plan terminations and benefit distributions to the hard-working people owed these funds.”
The Chapter 7 amendments permit trustees and their designees to select and pay themselves for services in connection with terminating and winding up bankrupt companies’ retirement plans, EBSA noted.
The American Retirement Association submitted a comment letter on July 16 to the DOL’s EBSA, calling for further amendments to the Abandoned Plan Program. While the advocacy group generally championed the changes, it made the case for further changes to two areas.
First, it argued that it is too restrictive to state that only a plan asset custodian who has served as a bankruptcy trustee within the previous five years is eligible; the ARA requested that EBSA expand eligibility to anyone who can appear before the bankruptcy court handling the case.
Second, the ARA took exception with the rule’s $2,000 threshold for delinquent contributions to be administered by a trustee. The ARA noted that a terminated plan’s service providers will continue charging administrative fees, even when a plan is abandoned, which can make the claims significantly more expensive than the base amount. The advocacy group recommended that the DOL “revise the rule to provide that delinquent contributions are de minimis if the trustee reasonably determines the realizable value of those contributions is less than the estimated cost of filing a liquidated proof of claim.”
Revision of that rule would “promote efficient termination of plans and reduce the ultimate fees participants must pay while balancing the legitimate interest of ensuring plans obtain independent representation when such representation is likely to add value to participants,” the ARA argued.
