Trustees will find it easier to distribute assets from 401(k) plans of companies going through Chapter 7 bankruptcy liquidation proceedings under proposed rules from the EBSA announced Tuesday.
Under the proposal, the agency's existing Abandoned Plan Program would be amended to streamline the process of terminating the plans and distributing the benefits, which would save both time and administrative fees.
“The rule we're proposing today is designed to help workers and retirees of bankrupt companies gain access to their retirement money sooner,” Phyllis C. Borzi, assistant secretary of Labor for the Employee Benefits Security Administration, said in a statement.
EBSA noted that abandoned plan applications jumped to 331 in 2010 from 70 in 2007. Without the proposed changes, agency officials expect to average 330 requests each year.
If the proposed changes are finalized, EBSA predicts a 50% increase in such applications.
When the abandoned plan rules were first issued in 2006, bankruptcy trustees were generally precluded from serving as qualified termination administrators. The proposed amendments are designed to help bankruptcy trustees fulfill their fiduciary obligations under ERISA and to ensure that fees are reasonable.
After a 60-day comment period, EBSA officials will evaluate whether further revisions are needed before finalizing the amended rules.