Abandoned Individual Account Plan Final Regulations And Class Exemption
U.S. Department of Labor
Significant business events, such as bankruptcies, mergers, acquisitions, and other similar transactions affecting the status of an employer, too often result in employers, particularly small employers, abandoning their individual account pension plans (e.g., 401(k) plans). When this happens, custodians such as banks, insurers, mutual fund companies, etc. are left holding the assets of these abandoned plans but do not have the authority to terminate such plans and make benefit distributions – even in response to participant demands. In these situations, participants and beneficiaries have great difficulty accessing the benefits they have earned. In response, the Labor Department’s Employee Benefits Security Administration (EBSA) has developed rules to facilitate a voluntary, safe and efficient process for winding up the affairs of abandoned individual account plans so that benefit distributions are made to participants and beneficiaries. Information about the program is available under the Abandoned Plan Program section of EBSA’s Web site at www.dol.gov/ebsa.
Overview of Regulations
The regulations establish standards for determining when a plan is abandoned, simplified procedures for winding up the plan and distributing benefits to participants and beneficiaries, and provide guidance on who may initiate and carry out the winding-up process.
A plan generally will be considered abandoned if no contributions to or distributions from the plan have been made for a period of at least 12 consecutive months and, following reasonable efforts to locate the plan sponsor, it is determined that the sponsor no longer exists, cannot be located, or is unable to maintain the plan.
Determinations of Abandonment
Only a qualified termination administrator (QTA) may determine whether a plan is abandoned under the regulations. To be a QTA, an entity must hold the plan’s assets and be eligible as a trustee or issuer of an individual retirement plan under the Internal Revenue Code (e.g., bank, trust company, mutual fund family, or insurance company).
Termination and Winding-Up Process
The regulations establish specific procedures that QTAs must follow, including:
A QTA is not required to amend a plan to accommodate the termination.
The regulations include model notices that the QTA may use.
Distribution Safe Harbor for Missing Participants
The regulations establish a fiduciary safe harbor for distributions from terminating individual account plans (whether or not abandoned) on behalf of missing participants.
In most cases, the account of a missing participant will be transferred directly to an individual retirement plan. In some cases, accounts of $1,000 or less may be distributed to a bank account or state unclaimed property fund on behalf of the missing participant.
QTAs that follow the regulations will be considered generally to have satisfied the prudence requirements of ERISA with respect to winding-up activities.
A QTA does not have an obligation to conduct an inquiry or review to determine whether or what breaches of fiduciary responsibility may have occurred with respect to a plan prior to becoming the QTA for such plan.
A QTA is not required to collect delinquent contributions on behalf of the plan, provided that the QTA informs EBSA of known delinquencies.
Since more than one entity may be holding assets of a plan, the regulations provide a safe harbor for other asset custodians who cooperate with the QTA.
Annual Reporting Relief
The regulations provide annual reporting relief, under which QTAs are not responsible for filing a Form 5500 Annual Report on behalf of an abandoned plan, either in the terminating year or any previous plan years; but the QTA must complete and file a summary terminal report at the end of the winding-up process.
Instructions on how to file the terminal report will be available under the Abandoned Plan Program section of EBSA’s Web site at www.dol.gov/ebsa.
Accompanying the regulations is a class exemption that would provide conditional relief from ERISA’s prohibited transaction restrictions.
The exemption would cover transactions where the QTA selects and pays itself:
The Abandoned Plan Program will be administered by EBSA national and regional offices. Notifications under the program should be sent by email to email@example.com or by mail to:
For information regarding the Abandoned Plan Program, contact the U.S. Department of Labor at 1.866.444.EBSA (3272). For questions about the regulations, contact EBSA’s Office of Regulations and Interpretations at 202.693.8500. For questions about the class exemption, contact EBSA’s Office of Exemption Determinations at 202.693.8540.
This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 1.202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.