US Department of Labor encourages asset custodians and record-keepers to work together to wind up abandoned plans
WASHINGTON The U.S. Department of Labor's Employee Benefits Security Administration today announced that it has approved a process for JP Morgan Chase Bank NA and ADP Inc. to terminate and wind up approximately 180 defined contribution pension plans abandoned due to corporate crises or neglect. This action, conducted through EBSA's abandoned plan program, will give plan participants control over the fate of their retirement savings.
"The abandoned plan program provides a streamlined process for efficiently winding up abandoned plans," said Assistant Secretary for Employee Benefits Security Phyllis C. Borzi. "The alliance between JP Morgan and ADP is an excellent example of how custodians and record keepers can team up to terminate abandoned plans and help workers, and we encourage others to do the same."
When employers abandon their individual account pension plans, custodians such as banks, insurers and mutual fund companies are left holding the assets of these abandoned plans but without the authority to terminate such plans and make benefit distributions even in response to participant demands. EBSA developed the abandoned plan program 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.
According to papers filed with the department, one company, Emergent Business Services LLC, abandoned its defined contribution pension plan in 2006, and plan participants found themselves unable to access the benefits they had earned. But the alliance between JP Morgan and ADP means the participants in this and other plans will soon have control over the fate of their retirement savings. JP Morgan, the plan's asset custodian, elected to serve as the "qualified termination administrator" under the program, and chose ADP, the plan's record-keeper, to carry out the activities necessary to terminate and wind up the plan. ADP, as agent, filed the necessary papers with the department on behalf of JP Morgan. In addition to the Emergent Business Services plan, JP Morgan and ADP have elected to terminate and wind up approximately 180 other abandoned plans under the program, affecting approximately 690 plan participants and beneficiaries and involving almost $3 million in assets.
A pension plan generally is considered abandoned under the abandoned plan program if 12 consecutive months pass in which no contributions to or distributions from the plan are made, and if a qualified termination administrator determines that the sponsor no longer exists, cannot be located or is otherwise unable to maintain the plan. To date, almost $75 million in distributions have been made under the program. More information on the abandoned plan program is available at www.dol.gov/ebsa/compliance_assistance.html#section9