DOL Amends Abandoned Plan Program to Benefit Workers and Retirees
The Department of Labor (DOL) recently made significant amendments to the Abandoned Plan Program, allowing Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies’ retirement plans to workers and retirees. This long-awaited change, which was originally adopted in 2006, aims to streamline the process of terminating these plans and getting funds into the hands of those who need them most.
One of the key updates to the program is the expansion of qualifications for eligible designees. Previously, only plan asset custodians or individuals who had served as bankruptcy trustees within the past five years were allowed to participate. However, the DOL recognized that this limitation was too restrictive and decided to broaden the pool of eligible designees to include anyone who is eligible to appear before the bankruptcy court. This change is expected to lead to more efficient plan terminations and better outcomes for plan participants.
Another important aspect of the amended program is the recognition of potential conflicts of interest that can arise when the same bankruptcy trustee is assigned to represent the interests of the estate. The DOL rule now addresses this issue, particularly in cases where delinquent contributions exceed a certain threshold. By acknowledging and addressing these conflicts, the DOL is working to ensure that the interests of plan participants are protected throughout the termination process.
Lisa M. Gomez, assistant secretary for employee benefits security, emphasized the importance of these changes in a statement when the interim rules were announced in May. She highlighted the fact that these amendments will help to expedite the distribution of promised retirement savings to workers and their families, fulfilling the commitments made by their employers.
Overall, the updates to the Abandoned Plan Program are a positive step towards improving the efficiency and effectiveness of plan terminations in bankruptcy cases. By addressing key issues such as eligibility requirements and conflicts of interest, the DOL is working to ensure that retirement funds are distributed in a timely and fair manner. This is a significant development that will benefit workers and retirees who rely on these funds for their financial security.
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