Compliance March 9, 2005

DoL Proposes Financial Institutions Handle Abandoned Plan Payments

March 9, 2005 (PLANSPONSOR.com) - Financial institutions would be allowed to take responsibility for the assets in the approximately 1,650 401(k) plans abandoned each year in order to distribute the money to workers and their families under a proposed DoL rule.

Reported by

Fred Schneyer

>A news release from the US Department of Labor (DoL) said the plans hold $868 million in assets and cover 33,000 workers. The proposed rule provides standards for determining when a plan is abandoned and establishes a process for winding up the affairs of the plan and distributing benefits to workers.

>When implemented, the process would eliminate the need for costlier court approvals and allow workers to regain access to their benefits sooner, the DoL announcement said.

>The proposal also provides guidance on the application of tax qualification rules to plans terminated under this regulation. The DoL currently deals with abandoned plans on a case-by-case basis, often with the involvement of the courts, the news release said.

“Thousands of workers who have been denied access to their retirement benefits through no fault of their own will benefit from our proposed rules,” said Assistant Secretary of Labor Ann Combs, in the agency announcement. “Our proposal will empower financial institutions that hold plans’ assets to help participants gain access to their retirement benefits.”

>Public comments on the proposed rules should be submitted to the US Department of Labor, Employee Benefits Security Administration, Room N-5669, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attention: Abandoned Plan Regulation; or by email to e-ORI@dol.gov . The proposed regulations and exemption are to be published in the March 10 Federal Register .