Abandoned Plan

Hi, 

I'm looking for some advise on Abandoned plans.  When a plan sponsor decides to terminate their 401k retirement plan as per regulation it need to be closed within 12 months from the termination dates however we have seen plan sponsor becoming unresponsive which ultimately leads to Abandoned plan.  

From a record keeper perceptive what will be challenges to maintain an abandoned plan? also on the regulatory part if any? Kindly assist.

Thank you

The DOL has an abandoned plan program through which the custodian of assets (often a recordkeeper) can become a limited fiduciary for purpose of terminating the plan and distributing the assets.  We have a sizeable book of small employer plans and have a dozen or so become "abandoned" (a determination made under the criteria established by the DOL) and yours truly becomes the QTA (fiduciary) for purposes of winding up the plan.  Often, the threat of filing under the program or the actual filing will prompt the plan fiduciary (often under urging by the DOL) to do their job....

30 minutes ago, MoJo said:

The DOL has an abandoned plan program through which the custodian of assets (often a recordkeeper) can become a limited fiduciary for purpose of terminating the plan and distributing the assets.  We have a sizeable book of small employer plans and have a dozen or so become "abandoned" (a determination made under the criteria established by the DOL) and yours truly becomes the QTA (fiduciary) for purposes of winding up the plan.  Often, the threat of filing under the program or the actual filing will prompt the plan fiduciary (often under urging by the DOL) to do their job....

 

QTA is a long process getting an approval from DOL takes almost a year and this only piles up abandoned plan.  what other measures can reduce abandoned plans or how can we terminate abandoned plans. 

PS, you note that the plan sponsor is becoming unresponsive, which suggest they are not totally unresponsive.  I'm sure you have communicated to them the consequences of not closing out the plan in a timely manner, and the fact that the plan will no longer be considered terminated if assets are not zero within 12 months.  The penalties will start increasing exponentially as reporting and compliance deadlines are missed.  Hopefully, there is a reason for the lack of a response (other than the plan sponsor just doesn't care), and they will finish the termination.

I expect others involved with the plan are aware of the situation (plan's legal counsel, companies CPA, custodian...) since it sounds like there was a formal plan termination amendment that should have been communicated.  They may be able to reinforce the message of urgency.

You should avoid jumping into the role of the plan fiduciary, particularly if there has been no formal delegation of that responsibility that you agreed to.  Further, if you try to keep the plan going on your own, you very likely will not get paid for your efforts.

You (or a willing plan participant) can approach your local DOL office and explain the situation.  The DOL can follow up informally when it gets this type of information.

About Paul I’s last point: It’s EBSA internal policy to open an inquiry (not an investigation) if even one participant complains about an unresponsive employer/administrator. That often results in an explain-yourself letter addressed to the person EBSA sees, from Form 5500 reports and other records, as one who might act for the plan’s administrator or at least respond.

3 hours ago, PS said:

QTA is a long process getting an approval from DOL takes almost a year and this only piles up abandoned plan.  what other measures can reduce abandoned plans or how can we terminate abandoned plans. 

It takes a year before one can declare a plan abandoned, although we tell participants when they call to get their money that we can't without a fiduciary, and to call the DOL (and we give them the number).  Once the DOL is involved, the "year" wait is often waived..  Once filed with the DOL, we typically see action within 30-45 days, and then however long it takes to find participants and distribute assets.