Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74063 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Parts 2520, 2550, and 2578 

RIN 1210–AB47 

Amendments to the Abandoned Plan 

Regulations 

AGENCY: Employee Benefits Security 

Administration, Labor. 

ACTION: Proposed regulations. 

SUMMARY: This document contains 

proposed amendments to three 

regulations previously published under 

the Employee Retirement Income 

Security Act of 1974 that facilitate the 

termination of, and distribution of 

benefits from, individual account 

pension plans that have been 

abandoned by their sponsoring 

employers. The principal amendments 

propose to permit bankruptcy trustees to 

use the Department’s Abandoned Plan 

Program to terminate and wind up the 

plans of sponsors in liquidation under 

chapter 7 of the U.S. Bankruptcy Code. 

In addition, other technical 

amendments are proposed to improve 

the operation of the regulations. If 

adopted, the amendments would affect 

employee benefit plans, primarily small 

defined contribution plans, participants 

and beneficiaries, service providers, and 

individuals appointed to serve as 

trustees under chapter 7 of the U.S. 

Bankruptcy Code. 

DATES: Written comments should be 

received by the Department of Labor on 

or before February 11, 2013. 

ADDRESSES: Written comments may be 

submitted to the addresses specified 

below. All comments will be made 

available to the public. Warning: Do not 

include any personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publicly disclosed. All 

comments may be posted on the Internet 

and can be retrieved by most Internet 

search engines. Comments may be 

submitted anonymously. Comments 

may be submitted to the Department of 

Labor, by one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: e-ORI@dol.gov. Include RIN 

1210–AB47 in the subject line of the 

message. 

• Mail: Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, Room N–5655, 

U.S. Department of Labor, 200 

Constitution Avenue NW., Washington, 

DC 20210, Attention: Abandoned Plans. 

All submissions received must 

include the agency name and Regulation 

Identifier Number (RIN) for this 

rulemaking (RIN 1210–AB47). 

Comments received will be made 

available to the public, posted without 

change to http://www.regulations.gov 

and http://www.dol.gov/ebsa, and made 

available for public inspection at the 

Public Disclosure Room, N–1513, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue NW., Washington, DC 20210. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Ward Cibinic or Melissa R. 

Dennis, Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, (202) 693– 

8500. This is not a toll-free number. 

SUPPLEMENTARY INFORMATION: 

A. Executive Summary 

Pursuant to Executive Order 13563, 

this section of the preamble contains an 

executive summary of the rulemaking 

and related prohibited transaction class 

exemption (published elsewhere in the 

notice section of today’s Federal 

Register) in order to promote public 

understanding and to ensure an open 

exchange of information and 

perspectives. Sections B through G of 

this preamble, below, contain a more 

detailed description of the regulatory 

provisions and need for the rulemaking 

as well as its costs and benefits. 

1. Purpose of Regulatory Action 

In 2006, the Department of Labor (the 

Department) issued regulations 

establishing a program to facilitate the 

termination of and distribution of 

benefits from individual account plans 

that have been abandoned by their 

sponsors. In conjunction with the 

regulations, the Department also issued 

a class exemption that permits certain 

transactions associated with these types 

of terminations and distributions. The 

regulations and the class exemption 

(hereinafter referred to collectively as 

the Abandoned Plan Program or 

Abandoned Plan Regulations, unless 

otherwise indicated) currently are not 

available to plans whose sponsors are in 

liquidation under chapter 7 of the U.S. 

Bankruptcy Code (hereinafter referred to 

as chapter 7 plans). Since the 

establishment of the Abandoned Plan 

Program, on-going challenges associated 

with terminating and winding up 

chapter 7 plans have persuaded the 

Department that the Abandoned Plan 

Program should be expanded. This 

proposed rulemaking, along with the 

proposed amendments to the related 

class exemption, would help abate these 

challenges by making the Abandoned 

Plan Program available to bankruptcy 

trustees who, under the U.S. Bankruptcy 

Code, may have responsibility for 

administering such plans. The Secretary 

of Labor would make these amendments 

under her authority at section 505 of 

ERISA to prescribe such regulations as 

she finds necessary or appropriate to 

carry out the statute’s provisions. The 

Secretary also has the authority to issue 

exemptions from ERISA’s prohibited 

transaction rules in accordance with 

section 408(a) of ERISA and section 

4975(c)(2) of the Internal Revenue Code 

and pursuant to the exemption 

procedures established in 29 CFR part 

2570, subpart B. 

2. Summary of Major Provisions 

The major provisions of this 

rulemaking include the proposed 

amendments contained in paragraph (j) 

of proposed 29 CFR 2578.1. Pursuant to 

these proposed amendments, chapter 7 

plans would be considered abandoned 

upon the Bankruptcy Court’s entry of an 

order for relief with respect to the plan 

sponsor’s bankruptcy proceeding. The 

bankruptcy trustee or a designee would 

be eligible to terminate and wind up 

such plans under procedures similar to 

those provided under the Department’s 

current Abandoned Plan Regulations. If 

the bankruptcy trustee winds up the 

plan under the Abandoned Plan 

Program, the trustee’s expenses would 

have to be consistent with industry rates 

for similar services ordinarily charged 

by qualified termination administrators 

that are not bankruptcy trustees. The 

proposed amendment to the class 

exemption would permit bankruptcy 

trustees, as with qualified termination 

administrators under the current 

Abandoned Plan Regulations, to pay 

themselves from the assets of the plan 

(a prohibited transaction) for 

terminating and winding up a chapter 7 

plan under an industry rates standard. 

3. Summary of Costs and Benefits 

The Department estimates that the 

costs attributable to amending the 

Abandoned Plan Program to cover 

chapter 7 plans will be $64,000 

annually. The Department believes the 

benefits of expanding the program will 

significantly outweigh the costs. 

Expanding the program will encourage 

the orderly and efficient termination of 

chapter 7 plans and distribution of 

account balances, thereby enhancing the 

retirement income security of 

participants and beneficiaries in these 

plans. Absent the standards and 

procedures set forth in the amendments, 

some bankruptcy trustees may lack the 


emcdonald on DSK67QTVN1PROD with 
74064 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

1 71 FR 20820. See also 73 FR 58459 for 

subsequent amendments with regard to 

distributions on behalf of a missing non-spouse 

beneficiary. 

2 71 FR 20855. 

3See 71 FR 20821 (‘‘given the authority and 

control over plans vested in QTAs under the 

regulation, QTAs must be subject to standards and 

oversight that will reduce the risk of losses to the 

plans’ participants and beneficiaries’’). 

4Section 7701(a)(37) of the Code describes an 

‘‘individual retirement plan’’ as an individual 

retirement account described in section 408(a) of 

the Code, and an individual retirement annuity 

described in section 408(b) of the Code. Section 

408(a) of the Code describes the term ‘‘individual 

retirement account’’ as meaning a trust created or 

organized in the United States for the exclusive 

benefit of an individual or his beneficiaries, if 

certain requirements are met. Section 408(b) of the 

Code describes the term ‘‘individual retirement 

annuity’’ as meaning an annuity contract, or an 

endowment contract, which meets certain 

requirements. 

5For example, in responding to commenters who 

argued in favor of conferring qualified termination 

administrator status on bankruptcy trustees in 

liquidation cases when the debtor also is the plan 

administrator, the Department, in the preamble to 

the Abandoned Plan Regulations, stated its view at 

that time that such individuals are empowered by 

virtue of their appointment to take the steps 

necessary to terminate and wind up the affairs of 

a plan and, therefore, do not need the authority 

conferred by the Abandoned Plan Regulations. See 

71 FR 20821. 

6A bankruptcy trustee who undertakes these plan 

responsibilities is a fiduciary within the meaning of 

section 3(21) of ERISA. 

7The proposed extension is limited to plans 

whose sponsors entered liquidation under chapter 

7 of title 11 of the United States Code on the theory 

that such plans are effectively being abandoned by 

the sponsor as a result of the liquidation. 

Nonetheless, the Department requests comment on 

necessary guidance to properly update 

plan records, calculate account 

balances, select and monitor service 

providers, distribute benefits, pay fees/ 

expenses, and otherwise efficiently 

terminate and wind up chapter 7 plans. 

In addition, significant cost savings 

would result from the amendments 

because chapter 7 plans no longer 

would incur costly audit fees required 

to file the Form 5500 Annual Return/ 

Report. The Department’s full cost/ 

benefit analysis is set forth below in 

Section G of this preamble, entitled 

‘‘Regulatory Impact Analysis.’’ 

B. Background 

On April 21, 2006, the Department of 

Labor (the Department) issued three 

regulations (the Abandoned Plan 

Regulations) that collectively facilitate 

the orderly, efficient termination of, and 

distribution of benefits from, individual 

account pension plans that have been 

abandoned by their sponsoring 

employers.1 The first of these 

regulations, codified at 29 CFR 2578.1, 

establishes standards for determining 

when individual account plans may be 

considered ‘‘abandoned’’ and 

procedures by which financial 

institutions (so-called ‘‘qualified 

termination administrators’’ or ‘‘QTAs’’) 

holding the assets of such plans may 

terminate the plans and distribute 

benefits to participants and 

beneficiaries, with limited liability 

under title I of the Employee Retirement 

Income Security Act of 1974 (ERISA), 29 

U.S.C. 1002 et seq. The second 

regulation, codified at 29 CFR 

2550.404a–3, provides a fiduciary safe 

harbor for qualified termination 

administrators to make distributions on 

behalf of participants and beneficiaries 

who fail to elect a form of benefit 

distribution (these participants and 

beneficiaries are sometimes referred to 

as missing participants or beneficiaries). 

The third regulation, codified at 29 CFR 

2520.103–13, establishes a simplified 

method for filing a terminal report for 

abandoned individual account plans. 

Also on April 21, 2006, the Department 

granted a prohibited transaction 

exemption, PTE 2006–06, which 

facilitates the goal of the Abandoned 

Plan Regulations by permitting a 

qualified termination administrator, 

who meets the conditions in the 

exemption, to, among other things, 

select itself or an affiliate to carry out 

the termination and winding up 

activities specified in the Abandoned 

Plan Regulations, and to pay itself or an 

affiliate fees for those services.2

For the reasons set forth in the 2006 

preamble, the Abandoned Plan 

Regulations strictly limit who may be a 

qualified termination administrator.3

Specifically, in order to be a qualified 

termination administrator, an entity, 

first, must be eligible to serve as a 

trustee or issuer of an individual 

retirement plan within the meaning of 

section 7701(a)(37) of the Internal 

Revenue Code (Code) and, second, must 

hold assets of the plan on whose behalf 

it will serve as the qualified termination 

administrator.4 As a result of these 

conditions, bankruptcy trustees 

ordinarily do not qualify as qualified 

termination administrators under the 

Abandoned Plan Regulations. This fact 

was acknowledged when the 

Department published the Abandoned 

Plan Regulations in 2006.5

However, for several reasons, the 

Department is revisiting its earlier 

decision to preclude bankruptcy 

trustees from serving as qualified 

termination administrators. Pursuant to 

11 U.S.C. 704(a)(11), enacted as part of 

the Bankruptcy Abuse Prevention and 

Consumer Protection Act of 2005, 

Public Law 109–8, 119 Stat. 23, when an 

entity that sponsors an individual 

account plan is liquidated under 

chapter 7 of title 11 of the United States 

Code, the court administering the 

liquidation proceeding (and/or U.S. 

Trustee) will appoint a bankruptcy 

trustee to, among other things, continue 

to perform the obligations that would 

otherwise be required of the bankrupt 

entity with respect to the plan. 

Therefore, the bankruptcy trustee often 

is responsible for administering the 

plan, which may include taking the 

steps necessary to terminate the plan, 

wind up the affairs of the plan, and 

distribute plan benefits.6 While the U.S. 

Bankruptcy Code imposes these 

obligations on bankruptcy trustees, it 

does not provide guidance or standards 

for carrying out such activities. 

The Department believes that when 

the sponsor of an individual account 

plan is in liquidation in a chapter 7 

bankruptcy case, the plan should be 

terminated and wound up in an orderly 

and efficient manner. However, in 

bankruptcy cases, as with abandoned 

plans generally, usually the sponsor is 

not in a position to carry out this 

function. Although the trustee of the 

sponsor’s bankruptcy estate has the 

requisite legal authority, the Department 

has observed that such trustees may be 

unaware of their responsibilities and 

often are unfamiliar with ERISA, or how 

properly to terminate and wind up a 

plan. The frequent result is delay in 

distributing benefits to participants and 

beneficiaries and excessive cost to the 

plan. 

In the Department’s view, a 

bankruptcy trustee responsible for 

administering a chapter 7 debtor’s 

employee benefit plan is a fiduciary 

with respect to the plan for purposes of 

ERISA. Thus, when taking steps to wind 

up the affairs of the plan, the trustee 

must act consistently with ERISA’s 

fiduciary standards. The Department is 

proposing these regulations (which are 

in the form of amendments to the 

Abandoned Plan Regulations), and the 

accompanying prohibited transaction 

exemption amendment, in order to 

provide a process for the bankruptcy 

trustee to terminate the plan, distribute 

benefits to participants and 

beneficiaries, and pay necessary 

expenses, including to itself, in a 

manner that helps the bankruptcy 

trustee meet its fiduciary obligations. 

C. Overview of Proposed Rulemaking 

In general, this rulemaking proposes 

to extend the basic framework of the 

Abandoned Plan Regulations to plans 

(i.e., chapter 7 plans) whose sponsors 

are undergoing liquidation under 

chapter 7 of title 11 of the United States 

Code.7 The provisions of the existing 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74065 

whether there are other similar situations that could 

or should be covered by the Abandoned Plan 

Regulations. For example, should the Regulations 

cover plans whose sponsors are undergoing 

liquidation under a chapter 11 plan of liquidation? 

Should the Regulations cover situations when a 

plan’s sponsor enters receivership pursuant to 

applicable state or federal law (e.g., FDIC 

receivership)? If the Regulations should be 

extended to situations beyond the situations 

covered by the proposed extension, please 

specifically identify the situation, why the situation 

should be covered, the costs and benefits of 

covering the situation, and, if applicable, any state 

or federal law relevant to the situation. 

8On the other hand, a plan would not cease to 

be considered abandoned under proposed 

paragraph (j)(1) if the sponsor’s chapter 7 

proceeding is converted to a proceeding under 

chapter 11 after the plan is deemed terminated. In 

such circumstances, the qualified termination 

administrator would be expected to continue 

winding up the affairs of the plan in accordance 

with the Abandoned Plan Regulations. 

9But see note 7. 

10Any eligible designee should be selected and 

holding the assets of the chapter 7 plan by the time 

of the furnishing of the notice of plan abandonment 

to the Department under paragraph (j)(2) of the 

proposed amendments. 

Abandoned Plan Regulations would 

apply to chapter 7 plans in much the 

same way they apply now to abandoned 

plans, except to the extent that they are 

modified by this proposal to reflect 

fundamental differences between 

abandoned plans and chapter 7 plans. In 

this regard, the most significant 

amendments to the existing Abandoned 

Plan Regulations are contained in 

proposed paragraph (j) of 29 CFR 

2578.1. Other less significant or 

conforming amendments are needed to 

other parts of § 2578.1 and to the other 

two regulations (§ 2550.404a–3 and 

§ 2520.103–13) constituting the 

Abandoned Plan Regulations. Section D 

of this preamble describes the major 

proposed changes (the so-called chapter 

7 amendments) to the Abandoned Plan 

Regulations. This rulemaking, however, 

also proposes to make certain technical 

changes to the Abandoned Plan 

Regulations that are unrelated to chapter 

7 plans. These amendments are 

discussed in section E of this preamble. 

Section F of this preamble discusses the 

results of the Department’s consultation 

on this proposal with the Internal 

Revenue Service. Section G contains a 

detailed Regulatory Impact Analysis. 

For purposes of readability, the 

proposed rulemaking republishes the 

Abandoned Plan Regulations in their 

entirety, as revised, rather than the 

specific amendments only. 

D. Special Rules for Chapter 7 Plans 

1. Discussion of Major Changes to 29 

CFR 2578.1—Termination of 

Abandoned Individual Account Plans 

(a) In General 

Proposed paragraph (j) of § 2578.1 

contains the special rules for chapter 7 

plans. This paragraph contains four 

subparagraphs. Subparagraph (1) sets 

forth rules for when such plans may be 

considered abandoned and who may 

serve as qualified termination 

administrators. These rules are in lieu of 

the general rules in paragraphs (b) and 

(g) of § 2578.1, which do not apply to 

chapter 7 plans. Subparagraph (2) sets 

forth the content requirements for the 

notice of plan abandonment that 

qualified termination administrators of 

chapter 7 plans must send to the 

Department. These content 

requirements are in lieu of the content 

requirements in paragraph (c)(3) of 

§ 2578.1, which apply to abandoned 

plans in general. Subparagraph (3) sets 

forth special rules for winding up 

chapter 7 plans. These special rules are 

in lieu of some, but not all, of the 

winding up procedures in paragraph (d) 

of § 2578.1. Subparagraph (4) contains a 

rule of accountability that is applicable 

to bankruptcy trustees. The 

requirements of each of these 

subparagraphs are described in detail 

below. 

(b) Timing of Abandonment 

Proposed paragraph (j)(1)(i) is a 

timing rule. It provides that a chapter 7 

plan shall be considered abandoned 

upon the entry of an order for relief. No 

other findings must be made. The 

bankruptcy trustee then may establish 

itself or an eligible designee as the 

qualified termination administrator. 

Whether to establish itself or an eligible 

designee as the qualified termination 

administrator is optional on the part of 

the bankruptcy trustee. Abandonment 

status, on the other hand, is not 

optional; it is achieved by operation of 

law upon the entry of an order for relief. 

Proposed paragraph (j)(1)(i) contains a 

limitation on this status. If at any time 

before the plan is deemed terminated 

(plans generally will be deemed to be 

terminated on the ninetieth (90th) day 

following the date of the letter from 

EBSA acknowledging receipt of the 

notice of plan abandonment), the plan 

sponsor’s chapter 7 proceeding is 

dismissed or converted to a proceeding 

under chapter 11 of title 11 of the 

United States Code, the plan shall not 

be considered abandoned pursuant to 

paragraph (j)(1).8 The Department 

believes that a plan should not be 

considered abandoned merely because 

its sponsor is in reorganization.9

(c) Who May Serve as a Qualified 

Termination Administrator 

Proposed paragraph (j)(1)(ii) makes it 

clear that bankruptcy trustees may serve 

as qualified termination administrators 

even if they do not satisfy the rule in 

paragraph (g) of § 2578.1 that allows 

only large financial institutions and 

other asset custodians described in 

section 7701(a)(37) of the Code to be 

qualified termination administrators. 

Except as provided in paragraph (j), a 

bankruptcy trustee serving as qualified 

termination administrator would follow 

the same termination and winding-up 

procedures in the Abandoned Plan 

Regulations as would any other 

qualified termination administrator. The 

proposal also allows a bankruptcy 

trustee the option of designating 

someone else to serve as the qualified 

termination administrator. In this 

regard, however, the proposal strictly 

limits who the bankruptcy trustee may 

designate. Proposed paragraph (j)(1)(ii) 

provides that an ‘‘eligible designee’’ is 

any person or entity designated by the 

bankruptcy trustee that is eligible to 

serve as a trustee or issuer of an 

individual retirement plan, within the 

meaning of section 7701(a)(37) of the 

Code, and that holds assets of the 

chapter 7 plan. Thus, an eligible 

designee could be the plan’s asset 

custodian at the time of abandonment or 

another entity chosen later by the 

bankruptcy trustee.10 The bankruptcy 

trustee would be responsible for the 

selection and monitoring of any eligible 

designee in accordance with section 

404(a)(1) of ERISA. 

(d) Notice of Abandonment 

Proposed paragraph (j)(2) provides 

that, in accordance with the deemed 

termination provisions in paragraph 

(c)(1) and (c)(2) of § 2578.1, the qualified 

termination administrator must furnish 

to the Department a notice of plan 

abandonment that meets the content 

requirements in paragraph (j)(2). This 

notice essentially is the same as the 

notice of plan abandonment described 

in paragraph (c)(3) of § 2578.1 except for 

modifications that take into account 

information specific to chapter 7 plans 

and bankruptcy trustees. A proposed 

model ‘‘Notification of Plan 

Abandonment and Intent to Serve as 

Qualified Termination Administrator’’ 

reflecting the content requirements of 

proposed paragraph (j)(2) is being added 

for chapter 7 plans as Appendix C. 

Therefore, Appendices C and D have 

been re-proposed as Appendix D and 

Appendix E respectively. Paragraph 

(j)(2)(i) provides that the notice must 

include the name and contact 

information of the bankruptcy trustee 

and, if applicable, the name and contact 

information of the eligible designee 

acting as the qualified termination 


emcdonald on DSK67QTVN1PROD with 
74066 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

11Under this provision, an eligible designee’s 

duty to collect delinquent contributions is limited 

expressly to those delinquent contributions it 

knows about based on the information provided by 

the bankruptcy trustee at the time of the 

designation. Thus, an eligible designee would have 

no duty to collect delinquent contributions if the 

bankruptcy trustee failed to disclose them to the 

eligible designee. Nothing in this section imposes 

an obligation on the eligible designee to conduct an 

inquiry or review to determine whether there are 

delinquent contributions with respect to the plan. 

See § 2578.1(e)(2). 

12As discussed above, proposed paragraph 

(j)(3)(i) imposes on a qualified termination 

administrator to a chapter 7 plan a conditional duty 

to collect delinquent contributions. 

administrator pursuant to proposed 

paragraph (j)(1). Paragraph (j)(2)(ii) 

requires information about the chapter 7 

plan that the qualified termination 

administrator is winding up. Paragraph 

(j)(2)(iii) requires a statement that the 

plan is considered to be abandoned due 

to an entry of an order for relief under 

chapter 7 of the U.S. Bankruptcy Code, 

and a copy of the notice or order entered 

in the case reflecting the bankruptcy 

trustee’s appointment to administer the 

plan sponsor’s chapter 7 case. Paragraph 

(j)(2)(iv)(A) and (B) require the 

estimated value of the plan’s assets as of 

the entry of an order for relief; the name, 

employer identification number (EIN), 

and contact information for the entity 

holding the plan’s assets; and the length 

of time plan assets have been held by 

such entity, if held for less than 12 

months. Paragraph (j)(2)(iv)(C) and (D) 

require identification of any assets with 

respect to which there is no readily 

ascertainable fair market value, as well 

as information, if any, concerning the 

value of such assets, and an 

identification of known delinquent 

contributions. Paragraph (j)(2)(v) 

requires the name and contact 

information of known service providers 

to the plan. It also requires an 

identification of any services considered 

necessary to wind up the plan, the name 

of the service provider(s) that is 

expected to provide such services, and 

an itemized estimate of expenses for 

winding up services expected to be paid 

out of plan assets by the qualified 

termination administrator. Paragraph 

(j)(2)(vi) requires a statement indicating 

that the information provided in the 

notice is true and complete based on the 

knowledge of the person electing to be 

the qualified termination administrator, 

and that the information is being 

provided by the qualified termination 

administrator under penalty of perjury. 

(e) Winding-Up Procedures 

(i) In General 

Paragraph (d) of § 2578.1 sets forth 

specific steps that a qualified 

termination administrator must take to 

wind up an abandoned plan and, with 

respect to most such steps, the 

standards applicable to carrying out the 

particular activity. Under the proposal, 

paragraph (d) applies to chapter 7 plans 

except as modified by the provisions in 

proposed paragraph (j)(3). 

(ii) Delinquent Contributions 

Proposed paragraph (j)(3)(i) contains a 

conditional requirement to collect 

delinquent contributions. Specifically, 

this paragraph provides that the 

qualified termination administrator of a 

chapter 7 plan shall, consistent with the 

duties of a fiduciary under section 

404(a)(1) of ERISA, take reasonable and 

good faith steps to collect known 

delinquent contributions on behalf of 

the plan, taking into account the value 

of the plan assets involved, the 

likelihood of a successful recovery, and 

the expenses expected to be incurred in 

connection with collection. If the 

bankruptcy trustee designates an 

eligible designee as defined in proposed 

paragraph (j)(1)(ii), the bankruptcy 

trustee shall at the time of such 

designation notify the eligible designee 

of any known delinquent contributions. 

This collection requirement includes 

both participant contributions withheld 

from employee paychecks, but not 

forwarded by the debtor to the plan, as 

well as delinquent employer 

contributions owed by the debtor. This 

collection requirement applies to any 

qualified termination administrator to a 

chapter 7 plan whether it is a 

bankruptcy trustee or an eligible 

designee.11

The Department’s present belief is 

that bankruptcy trustees, by virtue of 

their knowledge and control of the 

debtor’s estate and of the debtor’s ERISA 

plan, are in the best position both to 

know of the liquidating sponsor’s 

delinquent contribution debts to the 

plan and to collect these delinquencies 

(or to notify the eligible designee so that 

it can collect them). However, the 

Department is interested in knowing 

whether, and under what 

circumstances, the qualified termination 

administrator’s duty to collect would 

unavoidably conflict with any duties the 

bankruptcy trustee may have under the 

U.S. Bankruptcy Code as the 

representative of the debtor’s estate. 

Please be specific about when, if ever, 

such conflicts might arise, whether and 

why such conflicts are disabling, and 

the specific provisions of the U.S. 

Bankruptcy Code that impose the 

conflicting obligations. 

(iii) Reporting Fiduciary Breaches 

Proposed paragraph (j)(3)(ii) contains 

a requirement to report activity to the 

Department that may be evidence of 

fiduciary breaches by prior plan 

fiduciaries. Specifically, the qualified 

termination administrator of a chapter 7 

plan (whether a bankruptcy trustee or 

eligible designee) must report known 

delinquent contributions (employer and 

employee) owed to the plan, and any 

activity that the qualified termination 

administrator believes may be evidence 

of other fiduciary breaches by a prior 

plan fiduciary that involve plan assets. 

Thus, for example, evidence of 

embezzlement by a prior plan fiduciary 

would be required to be reported. The 

proposal limits the reporting 

requirement to evidence of any 

fiduciary breaches that ‘‘involve plan 

assets’’ by a prior plan fiduciary. This 

limitation is intended to prevent a 

reporting requirement when no plan 

assets are involved. The Department 

intends to use this information to 

pursue and remedy fiduciary breaches 

where appropriate. Beyond this 

reporting requirement, a qualified 

termination administrator to a chapter 7 

plan ordinarily will have no further 

obligations under the Abandoned Plan 

Regulations with respect to such prior 

breaches, except with respect to 

collecting delinquent contributions 

owed to the plan.12

Information concerning fiduciary 

breaches must be reported in 

conjunction with the filing of the notice 

of plan abandonment (paragraph (j)(2)) 

or the final notice (paragraph (d)(2)(ix)). 

If the qualified termination 

administrator uses the model notices, 

such information may be included in 

the sections designated for other 

information. If the bankruptcy trustee 

designates an eligible designee, the 

bankruptcy trustee must provide the 

eligible designee with records under the 

control of the bankruptcy trustee to 

enable the eligible designee to carry out 

its responsibility to report information 

about fiduciary breaches. In the case of 

an eligible designee, if after the eligible 

designee completes the winding up of 

the plan, the bankruptcy trustee, in 

administering the debtor’s estate, 

discovers additional information not 

already reported in the notification 

required in paragraphs (j)(2) or (d)(2)(ix) 

that it believes may be evidence of 

fiduciary breaches that involve plan 

assets by a prior plan fiduciary, the 

bankruptcy trustee must report such 

activity to EBSA in a time and manner 

specified in instructions developed by 

EBSA’s Office of Enforcement. This 

supplemental reporting requirement is 

needed to address circumstances when 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74067 

13Proposed paragraph (j)(3)(vi)(B) merely 

confirms that an eligible designee may use the more 

generally applicable safe harbor at paragraph 

(d)(2)(v) of § 2578.1 without the special 

modifications contained in proposed paragraph 

(j)(3)(v)(A) for bankruptcy trustees. 

14Under § 2520.103–13, qualified termination 

administrators must file the Special Terminal 

Report for Abandoned Plans (STRAP). STRAPs 

contain total termination expenses paid by a plan 

and a separate schedule identifying each service 

provider and the amount received by that service 

provider, itemized by expense. STRAPs currently 

are available on the Department’s Web site (see 

http://askebsa.dol.gov/AbandonedPlanSearch/UI/ 

QTASearchResults.aspx). 

the bankruptcy trustee discovers 

information concerning fiduciary 

breaches after the eligible designee has 

completed the termination and winding 

up process. 

(iv) Notification and Distribution 

Requirements 

The notification and distribution 

requirements applicable to chapter 7 

plans under the proposal essentially are 

the same as the notification and 

distribution requirements applicable to 

non-chapter 7 plans under the existing 

Abandoned Plan Regulations, except as 

follows. First, proposed paragraph 

(j)(3)(iii) adds a requirement that 

participants must be informed that plan 

termination has occurred as a result of 

liquidation under the U.S. Bankruptcy 

Code. Second, proposed paragraph 

(j)(3)(iv) adds a requirement that the 

Department must receive certain 

information about the identity of the 

bankruptcy trustee and, if applicable, 

the eligible designee. 

Third, proposed paragraph (j)(3)(v) 

does not grant a bankruptcy trustee the 

ability to designate itself or an affiliate 

as the transferee of distribution 

proceeds. The Abandoned Plan 

Regulations provide that qualified 

termination administrators must 

distribute benefits in accordance with 

the form of distribution elected by the 

participant or beneficiary, and when the 

participant or beneficiary fails to make 

an election, the qualified termination 

administrator has the ability to 

designate itself or an affiliate as the 

transferee of the distribution proceeds. 

(See paragraph (d)(2)(vii)(C) of § 2578.1.) 

Typically this would occur where the 

qualified termination administrator has 

its own proprietary investment vehicle, 

such as an individual retirement plan 

within the meaning of section 

7701(a)(37) of the Code. The proposal 

does not extend this option to 

bankruptcy trustees based on the 

Department’s understanding that 

bankruptcy trustees do not maintain 

proprietary investment vehicles within 

the meaning of section 7701(a)(37) of 

the Code. 

(v) Payment of Reasonable Fees 

Proposed paragraph (j)(3)(vi) 

addresses fees that a bankruptcy trustee 

may pay to itself, or others, from the 

plan’s assets in connection with 

following the termination and windingup procedures in the proposed 

amendments. Subparagraph (A) of 

paragraph (j)(3)(vi) contains the 

applicable standard in cases where the 

bankruptcy trustee is the qualified 

termination administrator. 

Subparagraph (B) of paragraph (j)(3)(vi) 

contains the applicable standard in 

cases when the bankruptcy trustee 

appoints an eligible designee to serve as 

the qualified termination 

administrator.13 The different standards 

in these subparagraphs are needed for 

two reasons: first, expense rates 

normally charged by bankruptcy 

trustees for administering estates of 

chapter 7 debtors may not be 

appropriate for purposes of carrying out 

the duties and responsibilities under the 

proposed amendments with respect to 

ERISA plans, and second, bankruptcy 

trustees are not likely to have significant 

experience in terminating and winding 

up the affairs of such plans. Finally, 

subparagraph (C) of paragraph (j)(3)(vi) 

regulates payments to the bankruptcy 

trustee by the eligible designee. 

Pursuant to proposed paragraph 

(j)(3)(vi)(A), the qualified termination 

administrator (i.e., when the bankruptcy 

trustee is the QTA) is permitted to pay, 

from plan assets, no more than the 

reasonable expenses of carrying out his 

or her authority and responsibility 

under the proposed amendments. 

Expenses of plan administration shall be 

considered reasonable if they are for 

services necessary to wind up the affairs 

of the plan and distribute benefits (see 

§ 2578.1(d)(2)(v)(B)(1)), if they are 

consistent with industry rates for the 

same or similar services ordinarily 

charged by qualified termination 

administrators who are not bankruptcy 

trustees (see proposed paragraph 

(j)(3)(vi)(A)), and if their payment would 

not constitute a prohibited transaction 

(see § 2578.1(d)(2)(v)(B)(3)). This 

standard is intended to make clear that 

bankruptcy trustees should look to the 

rates ordinarily charged by qualified 

termination administrators who are not 

bankruptcy trustees, e.g., banks and 

other asset custodians. Samples of these 

rates are available to the public in 

filings made to the Department.14 These 

filings may be a helpful source of 

information for bankruptcy trustees. 

The standard in proposed paragraph 

(j)(3)(vi)(A) (i.e., that expenses must be 

consistent with industry rates for the 

same or similar services ordinarily 

charged by qualified termination 

administrators who are not bankruptcy 

trustees) is intended to provide clarity 

and flexibility with respect to decisions 

regarding fee and expense payments by 

bankruptcy trustees who elect to be 

qualified termination administrators. In 

determining these fees and expenses, 

bankruptcy trustees still will have to 

make an inquiry into, and objectively 

determine, whether any particular fee or 

expenditure is reasonable using the 

standard in proposed paragraph 

(j)(3)(vi)(A). In this regard, the 

Department specifically requests 

comments on whether proposed 

paragraph (j)(3)(vi)(A) provides 

sufficient clarity as to the type and 

amount of fees and expenses that may 

be paid from plan assets in connection 

with terminating and winding up a plan 

under this proposal. For example, will 

bankruptcy trustees have difficulty 

determining industry rates for 

termination and winding up services 

despite the public filings mentioned 

above? Are these filings searchable in a 

helpful way to bankruptcy trustees? If 

proposed paragraph (j)(3)(vi)(A) does 

not provide sufficient clarity, please 

explain why not and identify any 

alternatives that should be considered 

by the Department. 

Proposed paragraph (j)(3)(vi)(C) 

provides that an eligible designee may 

pay from plan assets to a bankruptcy 

trustee the reasonable expenses that the 

bankruptcy trustee incurs in selecting 

and monitoring the eligible designee. 

This provision follows from the 

requirement in proposed paragraph 

(j)(1)(ii) that the bankruptcy trustee is 

responsible for the selection and 

monitoring of the eligible designee. 

Whether an expense is ‘‘reasonable’’ 

ordinarily depends on the facts and 

circumstances surrounding the 

particular expense. However, the 

Department notes that the rates charged 

to the plan by the bankruptcy trustee for 

selecting and monitoring the eligible 

designee are to be judged in relation to 

the rates charged by a plan fiduciary for 

similar services, rather than the 

generally higher fees charged by 

bankruptcy trustees for legal services 

provided to the bankruptcy estate. In 

any event, pursuant to proposed 

paragraph (j)(3)(vi)(C), the eligible 

designee would apply the rules in 

paragraph (d)(2)(v) of § 2578.1 in 

determining whether the payment to the 

bankruptcy trustee for monitoring 

services is reasonable. While the 

Department believes that it would be 

appropriate for bankruptcy trustees to 

expect remuneration for providing 

monitoring services, the Department 


emcdonald on DSK67QTVN1PROD with 
74068 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

15 71 FR 20806. 

16 In this context, a missing or nonresponsive 

participant or beneficiary is a participant or 

beneficiary who fails to elect a form of distribution 

within 30 days from the date the notice of plan 

termination is furnished by the qualified 

termination administrator. 

17The justification for the special rule is set forth 

in the preamble to the Abandoned Plan Regulations. 

See 71 FR 20828. The conditions related to the 

special rule are set forth at 29 CFR 2550.404a– 

3(d)(1)(iii). 

intends to review closely such 

remuneration to ensure that 

arrangements under the proposed 

amendments are not contrary to the 

interests of participants and 

beneficiaries. 

(f) Rule of Accountability 

Proposed paragraph (j)(4) contains a 

rule of accountability. The rule provides 

that a bankruptcy trustee acting as 

qualified termination administrator, or 

an eligible designee, shall not, through 

waiver or otherwise, seek a release from 

liability under ERISA, or assert a 

defense of derived judicial immunity (or 

similar defense) in any action brought 

against the bankruptcy trustee or 

eligible designee arising out of its 

conduct under the proposed 

amendments. The Department is aware 

that bankruptcy trustees sometimes 

request from the bankruptcy court 

comfort orders seeking relief from 

ERISA fiduciary liability in their roles 

as administrators to plans. However, 

bankruptcy trustees who wind up 

chapter 7 plans under the Abandoned 

Plan Regulations benefit from the 

limited exposure to ERISA liability 

provided by the regulations. (See 

paragraph (e) of § 2578.1.) The 

Department believes the regulatory 

framework, as constructed, serves to 

minimize to the greatest extent possible 

the liability and exposure of qualified 

termination administrators who carry 

out their responsibilities in accordance 

with the provisions of the Abandoned 

Plan Regulations.15 As a condition to 

receiving the benefit of the limited 

liability provided by the Abandoned 

Plan Regulations, a bankruptcy trustee 

would not be permitted to seek a release 

from liability under ERISA. Paragraph 

(j)(4) does not prevent a bankruptcy 

trustee from asking a court to resolve an 

actual dispute involving a plan or to 

obtain an order required under the U.S. 

Bankruptcy Code. However, it does bar 

a trustee from seeking a ruling from a 

court for approval of its actions, where 

a trustee has the power to act without 

judicial approval. For example, a 

bankruptcy trustee may not seek court 

approval of the amount to pay a 

professional from assets of the plan, but 

must exercise his or her own judgment. 

In addition, a bankruptcy trustee may 

not claim it is not subject to suit for 

breach of fiduciary duty as to the 

amount of a payment from an ERISA 

plan because it previously obtained a 

court order approving the amount of the 

payment. 

2. Discussion of Changes to 29 CFR 

2550.404a–3—Safe Harbor for 

Distributions From Terminated 

Individual Account Plans 

The Abandoned Plan Regulations, in 

relevant part, provide that, with respect 

to missing and nonresponsive 

participants or beneficiaries,16 qualified 

termination administrators shall 

distribute benefits in the form of direct 

rollovers to individual retirement plans 

within the meaning of section 

7701(a)(37) of the Code. (See 

§ 2578.1(d)(2)(vii)(B).) However, the 

Abandoned Plan Regulations also 

contain a special rule for small account 

balances of $1,000 or less.17 Under the 

special rule, a qualified termination 

administrator may make distributions to 

certain bank accounts (interest-bearing 

federally insured bank or savings 

association accounts) or to State 

unclaimed property funds. (See 29 CFR 

2550.404a–3(d)(1)(iii).) The proposal 

would add paragraph (d)(iv) to 

§ 2550.404a–3 to make clear that the 

special rule also is available in the case 

of chapter 7 plans. 

3. Discussion of Changes to 29 CFR 

2520.103–13—Special Terminal Report 

for Abandoned Plans 

The Abandoned Plan Regulations 

provide for simplified reporting to the 

Department for qualified termination 

administrators that wind up the affairs 

of abandoned plans. (See 29 CFR 

2520.103–13.) The time savings 

resulting from this abbreviated reporting 

requirement reduces administrative 

costs for abandoned plans and preserves 

account balances, resulting in increased 

benefits to participants and 

beneficiaries. The proposed 

amendments would revise these 

simplified reporting requirements to 

make clear that they are available to 

chapter 7 plans. Specifically, the 

proposal would revise paragraph (b)(1) 

of § 2520.103–13 to include 

identification information about the 

bankruptcy trustee as well as the 

qualified termination administrator, if 

the qualified termination administrator 

is not the bankruptcy trustee. 

E. Technical Amendments Unrelated to 

Chapter 7 Plans 

The Abandoned Plan Regulations 

require qualified termination 

administrators to state whether they, or 

any affiliate, are, or in the past 24 

months were, the subject of an 

investigation, examination, or 

enforcement action by the Department, 

the Internal Revenue Service, or the 

Securities and Exchange Commission 

concerning their conduct as a fiduciary 

or party in interest with respect to any 

ERISA covered plan. (See 

§ 2578.1(c)(3)(i)(C).) This statement 

must be included in the notice of plan 

abandonment furnished to the 

Department before a plan can be 

terminated and wound up under the 

Abandoned Plan Regulations. Although 

such information does not alone bar a 

person from serving as a qualified 

termination administrator, the statement 

serves as a flagging mechanism to help 

the Department identify potential 

arrangements that are not in the best 

interests of plan participants and 

beneficiaries. However, the Department 

is proposing to eliminate this 

requirement for the following reasons. 

First, the Department generally can 

determine from its own records whether 

a person is, or in the past 24 months 

was, the subject of an investigation 

concerning his conduct as a fiduciary or 

party in interest with respect to any 

ERISA covered plan. Second, by 

definition, qualified termination 

administrators tend to be large financial 

institutions with many affiliations and, 

therefore, it may be costly for them to 

prepare an accurate statement. Third, 

the requirement appears to deter some 

qualified persons from serving as 

qualified termination administrators. In 

this regard, some individuals have 

expressed a reluctance to affirm in a 

notice to the federal government that 

they or an affiliate are or were under an 

investigation, examination, or 

enforcement action by the Department, 

the Internal Revenue Service, or the 

Securities and Exchange Commission 

concerning their conduct as a fiduciary 

or party in interest with respect to any 

ERISA covered plan. Because the 

Department believes that this 

requirement now is unnecessary and 

may even discourage the use of the 

Abandoned Plan Program, it is 

proposing to remove the requirement 

from the Abandoned Plan Regulations. 

In conjunction with the proposed 

removal of the investigation statement 

in § 2578.1(c)(3)(i)(C) referenced above, 

the Department intends to remove a part 

of the definition of the term ‘‘affiliate’’ 

in § 2578.1(h). In the Abandoned Plan 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74069 

18 71 FR 20830. 

19See 71 FR 20827 (further discussion of the 

Department’s response to commenters on the three 

IRS conditions). 

Regulations, the term ‘‘affiliate’’ for 

general purposes of § 2578.1 means any 

person directly or indirectly controlling, 

controlled by, or under common control 

with, the person, or any officer, director, 

partner or employee of the person. (See 

§ 2578.1(h)(1).) However, for the specific 

purpose of the requirement for qualified 

termination administrators to state 

whether they, or any affiliate are, or in 

the past 24 months were, the subject of 

an investigation, examination, or 

enforcement action by the Department, 

the Internal Revenue Service, or the 

Securities and Exchange Commission 

concerning the their conduct as a 

fiduciary or party in interest with 

respect to any ERISA covered plan, the 

Abandoned Plan Regulations contain a 

narrower definition in § 2578.1(h)(2). 

Given the proposal to eliminate this 

statement regarding investigations, the 

Department also is proposing to 

eliminate the narrower definition of 

‘‘affiliate.’’ The generally applicable 

definition of the term ‘‘affiliate’’ would 

remain in effect. (See modifications in 

the proposal to paragraph (h) of 

§ 2578.1.) 

The Abandoned Plan Regulations 

generally require the qualified 

termination administrator to distribute a 

missing or nonresponsive participant’s 

account balance to an individual 

retirement plan in the participant’s 

name. (See § 2578.1(d)(2)(vii).) An 

exception exists for account balances of 

$1,000 or less, which may be transferred 

to an interest-bearing, federally-insured 

bank or savings association account or 

to the unclaimed property fund of a 

State, if certain conditions are satisfied. 

(See § 2550.404a–3(d)(1)(iii).) 

Sometimes a qualified termination 

administrator will know that a missing 

participant whose account balance is 

greater than $1,000 is deceased and that 

there is no named beneficiary, or that 

the named beneficiary also is deceased. 

In such circumstances, the Abandoned 

Plan Regulations require the qualified 

termination administrator to transfer the 

participant’s account balance to an 

individual retirement plan even if it is 

unlikely that anyone will ever claim 

these benefits. The Department has been 

advised that, in some cases, providers of 

individual retirement plans will not 

accept such distributions. The 

Department is concerned that obstacles 

like this prevent abandoned plans from 

being completely terminated and could 

prevent qualified entities from serving 

as qualified termination administrators, 

leaving participants in abandoned plans 

with no ability to access their retirement 

benefits. This proposal, therefore, 

conditionally would permit qualified 

termination administrators to transfer 

the account balances of decedents to an 

appropriate bank account or a state’s 

unclaimed property fund, regardless of 

the size of the account balance. Such a 

transfer would be permitted only if the 

qualified termination administrator 

reasonably and in good faith finds that 

the participant and, if applicable, the 

named beneficiary, are deceased, and 

includes in the Final Notice to EBSA the 

identity of the deceased participant and/ 

or beneficiary and the basis for the 

finding. (See proposed paragraph 

(d)(1)(v) of § 2550.404a–3.) The 

Department is soliciting public 

comments specifically on whether the 

proposed conditions sufficiently 

safeguard the rights of participants and 

beneficiaries. For example, should a 

qualified termination administrator be 

prohibited from these transfers if it has 

actual knowledge that a descendent of 

the deceased has a claim? 

The final step in winding up an 

abandoned plan under the Abandoned 

Plan Regulations is filing the Special 

Terminal Report for Abandoned Plans 

(STRAP) under § 2520.103–13. As stated 

in the preamble to the Abandoned Plan 

Regulations, the purpose of this 

provision is to provide annual reporting 

relief relating to abandoned plan filings 

by qualified termination 

administrators.18 The contents of the 

STRAP include, for example, total assets 

of the plan as of the deemed termination 

date, termination expenses paid by the 

plan, and the total amount of 

distributions. To file the STRAP, a 

qualified termination administrator 

must use the Form 5500 and either the 

Schedule I or a ‘‘Schedule QTA.’’ 

Instructions for filing the STRAP are not 

included in the instructions to the Form 

5500 Annual Return/Report of 

Employee Benefit Plan. Specific 

instructions for completing and filing 

the STRAP are on EBSA’s Web site at 

http://www.dol.gov/ebsa/publications/ 

APterminalreport.html. This proposal 

would amend paragraph (c)(2) of 

§ 2520.103–13 to clarify and update the 

specific location of these instructions. 

F. Internal Revenue Service 

As it did in connection with the 

existing Abandoned Plan Regulations, 

the Department conferred with 

representatives of the Internal Revenue 

Service regarding the qualification 

requirements under the Code as applied 

to plans that are terminated pursuant to 

29 CFR 2578.1, as modified by the 

proposed amendments contained in this 

document. The Internal Revenue 

Service advised that it would not 

challenge the qualified status of any 

plan terminated under § 2578.1 or take 

any adverse action against, or seek to 

assess or impose any penalty on, the 

qualified termination administrator, the 

plan, or any participant or beneficiary of 

the plan (including the qualified status 

of any chapter 7 plan terminated under 

these proposed amendments) as a result 

of such termination, including the 

distribution of the plan’s assets, 

provided that the qualified termination 

administrator satisfies three conditions. 

First, the qualified termination 

administrator, based on plan records 

located and updated in accordance with 

§ 2578.1(d)(2)(i), reasonably determines 

whether, and to what extent, the 

survivor annuity requirements of 

sections 401(a)(11) and 417 of the Code 

apply to any benefit payable under the 

plan and takes reasonable steps to 

comply with those requirements (if 

applicable). Second, each participant 

and beneficiary has a nonforfeitable 

right to his or her accrued benefits as of 

the date of deemed termination under 

§ 2578.1(c)(1), subject to income, 

expenses, gains, and losses between that 

date and the date of distribution. Third, 

participants and beneficiaries must 

receive notification of their rights under 

section 402(f) of the Code. This 

notification should be included in, or 

attached to, the notice described in 

§ 2578.1(d)(2)(vi). Notwithstanding the 

foregoing, as indicated in the preamble 

to the final Abandoned Plan Regulations 

(71 FR 20827), the Internal Revenue 

Service reserves the right to pursue 

appropriate remedies under the Code 

against any party who is responsible for 

the plan, such as the plan sponsor, plan 

administrator, or owner of the business, 

even in its capacity as a participant or 

beneficiary under the plan.19

The Internal Revenue Service also 

advised the Department that chapter 7 

bankruptcy trustees using the 

Abandoned Plan Program would not be 

expected to use the Employee Plans 

Compliance Resolution System (EPCRS) 

as a condition to this relief. 

G. Regulatory Impact Analysis 

1. Background and Need for Regulatory 

Action 

As stated earlier in this preamble, this 

document contains proposed 

amendments to three previously 

published Abandoned Plan Regulations 

that facilitate the termination of, and 

distribution of benefits from, individual 

account pension plans that have been 

abandoned by their sponsoring 


emcdonald on DSK67QTVN1PROD with 
74070 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

employers. The amendments primarily 

propose to: (1) Permit bankruptcy 

trustees to use the Department’s 

Abandoned Plan Regulations to 

terminate and wind up the plans of 

sponsors in liquidation under chapter 7 

of the U.S. Bankruptcy Code; (2) 

eliminate the requirement that qualified 

termination administrators state in a 

notice to the Department whether they, 

or any affiliate are, or in the past 24 

months were, the subject of an 

investigation, examination, or 

enforcement action by the Department, 

the Internal Revenue Service, or the 

Securities and Exchange Commission 

concerning their conduct as a fiduciary 

or party in interest with respect to any 

ERISA covered plan; and (3) 

conditionally permit qualified 

termination administrators to transfer 

the account balances of decedents to an 

appropriate bank account or a state’s 

unclaimed property fund regardless of 

the size of the account balance. The 

need for these regulatory changes is 

explained in detail above in the 

‘‘Background’’ section and in the 

overview sections, C through F, of this 

preamble. 

2. Executive Order 12866 and 13563 

Statement 

Executive Orders 13563 and 12866 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing and 

streamlining rules, and of promoting 

flexibility. It also requires federal 

agencies to develop a plan under which 

the agencies will periodically review 

their existing significant regulations to 

make the agencies’ regulatory programs 

more effective or less burdensome in 

achieving their regulatory objectives. 

The Department has identified the 

amendments to the Abandoned Plan 

Regulations as a retrospective regulatory 

review project consistent with the 

principals of Executive Order 13563. 

The Department believes that the 

proposed changes to the Abandoned 

Plan Regulations would improve the 

overall efficiency of the Abandoned 

Plan Program, increase its usage, and 

substantially reduce burdens and costs 

on bankruptcy trustees terminating the 

plans of sponsors in chapter 7 

liquidation, the plans of bankrupt 

sponsors, and the participants in these 

plans. 

Under Executive Order 12866, 

‘‘significant’’ regulatory actions are 

subject to the requirements of the 

executive order and review by the Office 

of Management and Budget (OMB). 

Section 3(f) of the executive order 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule (1) having an annual effect on the 

economy of $100 million or more, or 

adversely and materially affecting a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

tribal governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. It has been determined that this 

proposed rule is not a ‘‘significant 

regulatory action’’ under section 3(f) of 

the executive order. Accordingly, OMB 

has not reviewed this regulatory action 

or the Department’s assessment of its 

costs and benefits, which is presented 

below. 

3. Number of Affected Entities 

As stated above, the proposed 

amendments to the Abandoned Plan 

Regulations would extend the 

framework of the regulations to chapter 

7 plans. In order to estimate the number 

of entities affected by the Abandoned 

Plan Regulations as amended by the 

proposal, the Department must 

determine the number of abandoned 

plans that would be eligible to be 

terminated and wound up under the 

Abandoned Plan Program. At the 

inception of the Abandoned Plan 

Program in 2006, the Department based 

its estimate of the number of eligible 

plans upon Form 5500 data. Because the 

Department has over five years of 

experience with the Abandoned Plan 

Program, it now can base its estimate on 

data from EBSA’s Office of Enforcement. 

These data show that in fiscal year 2007, 

the Department received 70 applications 

from potential qualified termination 

administrators to wind up abandoned 

plans. The number of applications 

increased to 331 in fiscal year 2010. 

Based on the foregoing, the Department 

estimates that approximately 330 plans 

covering 1,980 participants (330 plans × 

6 participants per plan) would be 

terminated and wound up under the 

Abandoned Plan Program each year if 

the program remains unchanged. 

The Department believes that there 

will be a 50 percent increase in the 

number of applications to the 

Abandoned Plan Program if plans of 

sponsors entering liquidation are 

permitted to be terminated and wound 

up under the Abandoned Plan Program. 

This would increase the total number of 

applications to 495 plans (330 plans × 

1.5), and the number of affected 

participants to 2,970 (495 plans × 6 

participants per plan), assuming that 

chapter 7 plans have roughly the same 

number of participants as other eligible 

plans. The Department welcomes 

comments regarding these estimates. 

4. Costs 

The Department estimates that the 

cost associated with extending the 

Abandoned Plan Program to chapter 7 

plans would total approximately 

$64,000. These costs only would be 

imposed on the estimated 165 chapter 7 

plans that chose to participate in the 

program. The Department also has 

updated its costs and benefits estimate 

for the entire Abandoned Plan Program 

to reflect its experience with the 

program since its inception in 2006. The 

Department estimates that the 330 

abandoned plans participating in the 

Abandoned Plan Program would incur 

the following costs: $127,000 in annual 

costs attributable to abandoned plans’ 

qualified termination administrator 

filings and notices; $4.48 million 

attributable to fiduciaries of the 

approximately 39,000 terminating plans 

(other than abandoned and chapter 7 

plans) continuing to use the Safe Harbor 

for Distributions from Terminated 

Individual Account Plans (29 CFR 

2550.404a–3), of which $3.52 million is 

equivalent hour burden cost attributable 

to in-house clerical staff and benefit 

managers’ time; and $961,000 in mailing 

cost to distribute the required notices to 

approximately 3.1 million participants. 

Overall, the Department estimates that 

the costs of the regulations and class 

exemption, as amended by the proposal, 

would total approximately $4.67 million 

($3.52 million in annual equivalent 

costs and $1.15 million in annual cost 

burden) but, as stated above, only 

$64,000 of such costs relate to the 

proposed amendments. These costs are 

quantified and discussed in more detail 

in the Paperwork Reduction Act section, 

below. 

5. Benefits 

The proposed amendments provide 

critical guidance that will encourage the 

orderly and efficient termination of 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74071 

20The Department invites public comments 

regarding the characteristics of chapter 7 plans that 

may participate in the Abandoned Plan Program. 

chapter 7 plans and distribution of 

account balances, thereby increasing the 

retirement income security of 

participants and beneficiaries in such 

plans. Absent the standards and 

procedures set forth in the Abandoned 

Plan Regulations, some bankruptcy 

trustees may lack the necessary 

guidance to properly terminate chapter 

7 plans and distribute benefits to 

participants and beneficiaries. 

Specifically, the Abandoned Plan 

Regulations clarify the bankruptcy 

trustee’s obligations as qualified 

termination administrator with respect 

to updating plan records, calculating 

account balances, selecting and 

monitoring service providers, 

distributing benefits, and paying fees 

and expenses. 

The Department believes that 

providing this guidance and allowing 

bankruptcy trustees to serve or 

designate others to serve as qualified 

termination administrators will lead to 

administrative cost savings for trustees 

that choose to participate in the 

Abandoned Plan Program. The 

Department has not quantified these 

benefits because it does not have 

sufficient information regarding the 

characteristics of chapter 7 plans.20 The 

Department expects that bankruptcy 

trustees will decide to participate in the 

Abandoned Plan Program based on their 

individual assessment of whether it 

would be more cost effective to 

terminate a plan inside or outside of the 

program. 

One of the most significant cost 

savings that would result from the 

proposed amendments is that chapter 7 

plans no longer would incur costly 

audit fees that otherwise would 

diminish plan assets, because 

bankruptcy trustees will file one 

streamlined termination report at the 

end of the winding up process in lieu 

of the Form 5500 Annual Return/Report. 

Other benefits associated with 

bankruptcy trustees’ participation in the 

Abandoned Plan Program are that the 

proposed rule would require that a 

qualified termination administrator of a 

chapter 7 plan (whether a bankruptcy 

trustee or eligible designee): (1) Take 

reasonable and good faith steps to 

collect known delinquent contributions 

on behalf of the plan, taking into 

account the value of plan assets 

involved, the likelihood of a successful 

recovery, and the expenses expected to 

be incurred in connection with the 

collection of contributions, and (2) 

report to the Department known 

delinquent contributions (employer and 

employee) owed to the plan, and any 

activity that the qualified termination 

administrator believes may be evidence 

of other fiduciary breaches by a prior 

plan fiduciary that involve plan assets. 

With respect to abandoned plans 

other than chapter 7 plans, the orderly 

termination of plans will produce 

quantitative benefits by maximizing 

account balances payable to participants 

and beneficiaries because prompt, 

efficient termination of abandoned 

plans would eliminate future 

administrative expenses that would 

otherwise diminish the plan’s assets. In 

addition, the regulations’ specific 

standards and procedures for 

terminating abandoned plans will 

reduce termination costs. Both of these 

quantitative benefits will reduce the 

extent to which plan assets are drawn 

upon to pay plan expenses. 

The Department estimates the benefits 

for such plans by comparing the 

ongoing administrative costs of 

maintaining an abandoned plan with 

the cost of terminating such a plan 

under the Abandoned Plan Regulations. 

The magnitude of the costs for a 

qualified termination administrator to 

wind up the affairs of an abandoned 

plan under the Abandoned Plan 

Regulations is meaningful only when 

compared to the savings of future 

administrative expenses that would 

result from the plan’s termination. A 

comparison of termination costs with 

administrative savings is complicated 

by the fact that termination costs will be 

incurred only once, while the savings in 

eliminated administrative costs will 

accrue throughout the years during 

which the plan would have continued 

to exist in its abandoned state. In order 

to assess the balance of costs and 

benefits, the Department has estimated 

the present value of future ongoing 

administrative expenses using a five 

percent discount rate over a period of 

three years after termination. The actual 

duration of abandonment cannot be 

determined with certainty; however, the 

Department believes that a period of one 

to five years provides a reasonable basis 

to illustrate the potential administrative 

cost savings that could arise in future 

years from the termination of 

abandoned plans. 

In order to determine the average 

costs for winding up abandoned plans 

under the Abandoned Plan Regulations, 

the Department examined the Special 

Terminal Reports for Abandoned Plans 

STRAPs filed by qualified termination 

administrators participating in the 

Abandoned Plan Program since its 

inception in 2006. These STRAPs 

indicate that average termination costs 

were $700 and that 60 percent of the 

plans incurred termination costs of less 

than $200. As stated above, the 

Department estimates that 330 plans 

would terminate under the Abandoned 

Plan Program if it remained unchanged, 

therefore, termination costs would total 

approximately $231,000 (330 plans × 

$700 termination costs per plan). 

In order to assess the benefits of the 

proposed amendments, the Department 

also must estimate the ongoing 

administrative expenses that would 

have been incurred by abandoned plans 

if such plans were not terminated under 

the Abandoned Plan Program. Since the 

inception of the Abandoned Plan 

Program in 2006, the average asset level 

of plans terminating under the program 

is $54,000. Data from a recent 

Investment Company Institute report 

prepared by Deloitte LLP indicate that 

401(k) plans with under $1 million in 

assets pay approximately 1.41 percent of 

total net assets in annual administrative 

fees. Given that over 99 percent of the 

plans had under $1 million in assets at 

the time of termination, 1.41 percent 

would be a reasonable estimate to use to 

determine administrative expenses that 

would have been incurred by 

abandoned plans. Assuming plans that 

are terminated and wound up under the 

Abandoned Plan Program pay fees at 

roughly the same rate as other small 

plans, the Department estimates that 

average ongoing administrative 

expenses would be approximately $760 

per year ($54,000 × .0141). 

Based on the foregoing, the present 

value of administrative expenses that 

otherwise would have been paid over 

the three years following termination 

exceeds the termination cost by 

approximately $1,470 ($2,170 of 

ongoing administrative expenses 

discounted at five percent over three 

years minus $700 up front termination 

costs = $1,470) generating expected 

savings for plan participants and 

beneficiaries of approximately $490,000 

($1,470 × 330 plans). In subsequent 

years, the savings resulting from 

eliminating ongoing administrative 

expenses that would have been incurred 

if abandoned plans were not terminated 

under the proposed amendments would 

further add to that differential. 

Benefits Associated with Amendment 

to Safe Harbor for Distributions from 

Terminated Individual Account Plans 

(29 CFR 2550.404a–3): This section 

provides a safe harbor under which plan 

fiduciaries (including qualified 

termination administrators) of 

terminated individual account plans can 

directly transfer a missing or 

nonresponsive participant’s account 

balance directly to appropriate 


emcdonald on DSK67QTVN1PROD with 
74072 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

investment vehicles in the participant’s 

name. An exception exists for account 

balances of $1,000 or less, which may be 

transferred to an interest-bearing, 

federally-insured bank or savings 

association account or to the unclaimed 

property fund of a state, if certain 

conditions are satisfied. As stated above 

in this preamble, § 2550.404a–3 is being 

amended to conditionally permit 

qualified termination administrators to 

transfer the account balances of 

decedents to an appropriate bank 

account or a state’s unclaimed property 

fund, regardless of the size of the 

account balance. The proposed 

amendments would remove an obstacle 

to greater usage of the Abandoned Plan 

Program by eliminating the need to 

establish costly individual retirement 

plans for the account balances of known 

deceased participants that are over 

$1,000 when it is unlikely that anyone 

will claim the funds in such plans. 

Benefits Associated with Amendment 

to Eliminate Statement of Past or 

Present Investigations: As stated above 

in this preamble, § 2578.1 is being 

amended to remove the under 

investigation statement in the notice of 

plan abandonment from the qualified 

termination administrator to the 

Department (see § 2578.1(c)(3)(i)(C)). 

The Department believes that, at 

present, this statement is unnecessary 

and may even discourage use of the 

Abandoned Plan Program. The 

statement is unnecessary because 

EBSA’s Office of Enforcement is able to 

run searches with only de minimis cost 

to determine whether potential qualified 

termination administrators are under 

investigation by the Department. By 

encouraging more potential qualified 

termination administrators to wind up 

abandoned plans in accordance with the 

Abandoned Plan Regulations, the 

Department believes abandoned plan 

terminations will occur more efficiently, 

and more participants and beneficiaries 

of abandoned plans will gain access to 

their benefits. 

6. Paperwork Reduction Act 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a preclearance consultation 

program to provide the general public 

and federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3506(c)(2)(A)). This helps to 

ensure that requested data can be 

provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

Currently, the Department is soliciting 

comments concerning the information 

collection request (ICR) included in the 

proposed rule on the amendments to the 

Abandoned Plan Regulations. A copy of 

the ICR may be obtained by contacting 

the PRA addressee shown below. The 

Department has submitted a copy of the 

proposed rule to OMB in accordance 

with 44 U.S.C. 3507(d) for review of its 

information collections. The 

Department and OMB are interested 

particularly in comments that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10235, New Executive 

Office Building, Washington, DC 20503; 

Attention: Desk Officer for the 

Employee Benefits Security 

Administration. OMB requests that 

comments be received within 30 days of 

publication of the proposed rule to 

ensure their consideration. 

PRA Addressee: Address requests for 

copies of the ICR to G. Christopher 

Cosby, Office of Policy and Research, 

U.S. Department of Labor, Employee 

Benefits Security Administration, 200 

Constitution Avenue NW., Room N– 

5718, Washington, DC 20210. 

Telephone (202) 693–8410; Fax: (202) 

219–5333. These are not toll-free 

numbers. ICRs submitted to OMB also 

are available at http://www.RegInfo.gov. 

The Department has assumed that 

most of the tasks that will be undertaken 

by qualified termination administrators 

in connection with abandoned plan 

terminations are the same as those 

required in normal plan administration, 

such as calculating or distributing 

benefits, and therefore are not 

accounted for as burden in this analysis 

because they are either part of the usual 

business practices of plans or have 

already been accounted for in ICRs for 

other statutory and regulatory 

provisions under title I of ERISA. 

The Abandoned Plan Regulations 

require a qualified termination 

administrator to send up to five notices 

in the process of terminating and 

winding up an abandoned plan. Before 

winding up an abandoned plan, the 

qualified termination administrator 

(other than the qualified termination 

administrator of a chapter 7 plan) must 

make reasonable efforts to locate or 

communicate with the plan sponsor, 

such as by sending a notice to the last 

known address of the plan sponsor 

notifying the sponsor of the intent to 

terminate and wind up the plan and 

allowing the sponsor an opportunity to 

respond. Following the qualified 

termination administrator’s finding of 

abandonment, or when there is an entry 

of an order for relief for a chapter 7 

plan, the qualified termination 

administrator must send notice to the 

Department of its eligibility to serve as 

qualified termination administrator to 

wind up the abandoned plan and 

provide other specified plan 

information. The qualified termination 

administrator then sends a notice to the 

participants and beneficiaries in the 

plan, written in a manner calculated to 

by understood by the average plan 

participant, that their plan is being 

terminated, what is their account 

balance and the date on which it was 

calculated by the qualified termination 

administrator, a description of the 

distribution options available under the 

plan and a request that the participant 

or beneficiary elect a form of 

distribution and inform the qualified 

termination administrator of such 

election, what will happen to their 

account if the participant or beneficiary 

fails to make a distribution election 

within 30 days of receipt of the notice, 

and other information regarding their 

rights under the plan’s termination. 

Upon terminating and distributing the 

assets of the plan, the qualified 

termination administrator must send a 

final notice to the Department stating 

that the plan has been terminated. The 

qualified termination administrator 

attaches to the final notice a STRAP. 

The Department has estimated the 

burden as a cost burden to the plan 

because the qualified termination 

administrator uses plan assets to pay for 

these notices and other costs of winding 

up the plan. These notices are 

information collection requests (ICRs) 

subject to the PRA. The hour and cost 

burden associated with these ICRs are 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74073 

21The Department estimates 2012 hourly labor 

rates to include wages, other benefits, and overhead 

based on data from the National Occupational 

Employment Survey (June 2011, Bureau of Labor 

Statistics) and the Employment Cost Index 

(September 2011, Bureau of Labor Statistics); the 

2010 estimated labor rates are then inflated to 2012 

labor rates. 

22Any discrepancies in calculations in this 

section and the table above result from rounding. 

Estimates are rounded to the nearest $10, $100, 

$1,000, or $10,000. Hour estimates also are rounded 

in the text. 

23 $26,000 = $7,000 for clerical cost time + 

$16,400 for financial professional time + $2,600 for 

mailing. 

summarized in the following table 

discussed below. 

COST BURDEN OF RULE

Bankrupt plans 

Chapter 7 

(new to this 

RIA) 

Abandoned 

plans—non 

Chapter 7 (in 

previous RIA) 

Terminating 

plans (in previous RIA) Total 

Notice to Plan Sponsor .................................................................................... $0 $5,500 $0 $5,500 

Notice to DOL .................................................................................................. 8,700 17,300 0 26,000 

Bankrupt Plans (Court Order) .......................................................................... 3,200 0 0 3,200 

Notice to Participants ....................................................................................... 3,600 7,200 0 10,700 

Final Notice ...................................................................................................... 3,300 6,700 0 10,000 

Bankrupt Plans (Fiduciary Breach) .................................................................. 600 0 0 600 

Form 5500 Terminal Report ............................................................................ 35,600 71,200 0 106,800 

Safe Harbor ..................................................................................................... 0 0 4,480,000 4,480,000 

Class Exemption Familiarization ...................................................................... 9,400 18,700 0 28,100 

Total .......................................................................................................... 64,000 127,000 4,480,000 4,670,000 

Notice to Plan Sponsor: This notice 

requirement only applies to plans that 

are not chapter 7 plans. The Department 

estimates that for each of these 

estimated 330 plans, a qualified 

termination administrator may utilize 

10 minutes of clerical staff time at an 

hourly labor rate of $28.21 to fill in the 

needed information on the plan sponsor 

notice, and five minutes of a financial 

professional’s time at an hourly labor 

rate of $66.36 to review and sign the 

notice.21 This results in approximately 

83 hours of clerical staff time with an 

associated cost burden of $1,600 (55 

hours x $28.21 per hour) and 27.5 hours 

of a financial professional’s time with 

an associated cost burden of $1,800 

(27.5 hours × $66.36 per hour).22

The rule requires plan sponsor notices 

to be sent by a method requiring 

acknowledgement of receipt. Therefore, 

mailing costs include $6.35 for postage 

and email receipt of delivery. The 

mailing costs include paper and print 

costs of five cents per page for the one 

page notice. Therefore, the materials 

and mailing costs are estimated to be 

$2,100 for the 330 notices. As indicated 

in the chart above, there are $5,500 in 

total costs associated with this 

requirement ($1,600 clerical, $1,800 

financial professional and $2,100 in 

mailing costs) all imposed on plans 

filing under the Abandoned Plan 

Program. 

Notice of plan abandonment to the 

Department: The Department estimates 

that for each of the estimated 495 plans, 

a qualified termination administrator 

may utilize 30 minutes of a clerical 

worker’s time at an hourly rate of $28.21 

to fill in the needed information on the 

notice. It also is assumed that 30 

minutes of a financial professional’s 

time with an hourly rate of $66.36 will 

be required to prepare required plan 

information, and to review and sign the 

forms. This results in about 248 hours 

(495 plans × .5 hours) of clerical staff 

time with an associated cost burden of 

$7,000 (495 plans × .5 hours × $28.21 

per hour), and 248 hours (495 plans × 

.5 hours) of a financial professional’s 

time with an associated cost burden of 

$16,400 (495 plans × .5 hours × $66.36 

per hour). 

The Department assumes that 

approximately 80 percent of these initial 

notices to the Department will be sent 

by mail and that the rest will be 

submitted electronically (495 plans × .8 

fraction by mail = 396 plans send notice 

by mail). Therefore, mailing costs 

include $6.35 for postage and email 

receipt of delivery. The mailing costs 

include paper and print cost of five 

cents per page. The model notice is 

three pages. Therefore, the materials and 

mailing cost are estimated to be $2,600 

(396 plans × ($6.35 + 3 pages × $.05 per 

page)) for the 396 notices that will be 

mailed. The total costs of this 

component are therefore $26,000 23

($8,700 of which are new costs 

attributable to the chapter 7 plans, 

which are 1⁄3 of the affected plans, and 

$17,300 of which are cost attributable to 

2⁄3 of the affected plans that are not 

chapter 7 plans). 

Notice of bankruptcy trustee’s 

appointment—Chapter 7 Plans: For the 

estimated 165 chapter 7 plans, an 

additional cost would be incurred for 

the qualified termination administrator 

to attach a copy of the notice on the case 

docket or order for relief reflecting the 

bankruptcy trustee’s appointment to 

administer the plan sponsor’s chapter 7 

liquidation case as well as identification 

information regarding the bankruptcy 

trustee. The Department estimates that it 

will take 15 minutes of a financial 

professional’s time to prepare the 

statement and collect required 

documents and five minutes of clerical 

time to make required copies. This is 

expected to impose an additional hour 

burden of approximately 41 hours (165 

plans × .25) on the financial 

professionals and a cost burden of 

$2,700 (41 hours × $66.36 per hour) on 

the financial professionals. For the 

clerical professionals, the hour burden 

is estimated at 14 hours (165 plans × 

.0833 hours) and associated cost burden 

is $400 (14 hours × $28.21 per hour). 

Material requirements are expected to 

be 10 pages, costing $66 in total ($0.50 

per affected plan × .80 fraction of plans 

that submit initial notices by paper × 

165 plans). The proposed rule requires 

the notice or order entered in the case 

reflecting the bankruptcy trustee’s 

appointment to be included with the 

initial notice. Thus, the total cost of this 

filing requirement is $3,200 ($2,700 + 

$400 + $66), all of which is for the 165 

Chapter 7 plans. 

Notice to Participants and 

Beneficiaries: The ERISA Advisory 

Council in the Report of the Working 

Group on Orphan Plans had indicated 

most abandoned plans are small plans 

with 25 or fewer participants and 


emcdonald on DSK67QTVN1PROD with 
74074 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

24 $7,000 in clerical costs + $2,700 in financial 

professional costs + $1,000 in mailing costs. 

beneficiaries. Thus, initially the 

Department conservatively estimated 

that there were 20 participants per plan 

impacted by the Abandoned Plan 

Regulations. However, after the 

inception of the Abandoned Plan 

Program, updated filings data provided 

by the Office of Enforcement show that 

in no year were there on average more 

than six participants per filing plan. The 

Department estimates that, using this 

updated information, approximately 330 

plans will apply each year if the 

Abandoned Plan Regulations remain 

unchanged. This covers a maximum of 

1,980 participants (330 plans × 6 

participants per plan). With bankruptcy 

trustees being permitted to wind up the 

plans of sponsors in chapter 7 

liquidation under the Abandoned Plan 

Regulations, the Department estimates 

that there will be a 50 percent increase 

in applications, bringing the total 

number of filings up to 495 (330 plans 

× 1.5). Assuming that chapter 7 plans 

have roughly the same number of 

participants as abandoned plans, the 

total number of participants affected 

would be 2,970 (495 plans × 6 

participants per plan). 

The Department estimates that for 

each of the estimated 495 terminating 

plans, a QTA may utilize 5 minutes of 

a financial professional’s time to review 

the notices. Clerical staff will spend on 

average 30 minutes preparing and 

mailing the notices (5 minutes per 

participant × 6 participants). This 

results in approximately 248 hours (495 

plans × 6 participants per plan × .0833 

hours per participant) of clerical staff 

time with an associated cost burden of 

$7,000 (248 hours × $28.21 per hour) 

and 41 hours (495 plans × .0833 hours 

per plan) of a financial professional’s 

time with an associated cost burden of 

approximately $2,700 (41 hours × 

$66.36 per hour). 

The model notice to participants is 

two pages. Therefore, the mailing and 

material costs are estimated to be 55 

cents per mailing (2 × $.05 + $0.45). Of 

the 2,970 participants (495 plans × 6 

participants per plan), 38 percent are 

expected to receive their notices 

electronically. The Department 

estimates that 1,840 participants will 

receive the notice by mail, creating a 

mailing cost burden of $1,000. In total, 

the cost burden from the notice to the 

participants and beneficiaries 

requirement is approximately $10,700.24

Because 1⁄3 of the affected plans are 

chapter 7 plans, $3,600 of the burden is 

expected to be for the chapter 7 plans 

and $7,100 for the 2⁄3 of affected plans 

that are abandoned. 

Final Notice: The Department 

estimates that for each of the estimated 

495 terminating plans, a qualified 

termination administrator will utilize 10 

minutes of a financial professional’s 

time to review the forms. Clerical staff 

will spend, on average, 10 minutes per 

notice preparing and mailing the 

notices. This results in about 83 hours 

(495 plans × .167 hours) of clerical staff 

time with an associated cost burden of 

$2,300 (83 hours × $28.21 per hour) and 

83 hours of a financial professional’s 

time (495 plans × .167 hours) with an 

associated cost burden of $5,500 (83 

hours × $66.36 per hour). 

The Department assumes that, as a 

usual and customary business practice, 

the final notice to the Department will 

be sent by a method requiring 

acknowledgement of receipt. The model 

final notice is two pages. Therefore, the 

material costs are estimated to be $.10 

per plan and postage of $6.35 per plan. 

For the 70 percent of plans that are 

expected to submit their applications by 

mail, total mailing costs are estimated to 

be $2,200 for the 495 notices (($6.35 per 

plan for mailing +$.10 for materials) × 

495 plans × .70 fraction of plans 

submitting by mail). Thus, there is 

approximately $10,000 in total costs for 

the final notice. Of that total, 

approximately $3,300 is dedicated to 

the 1⁄3 of affected plans that are chapter 

7 plans and $6,700 is attributable to the 

330 qualified termination administrator 

filings for the 2⁄3 of plans that are 

abandoned. 

Reporting Requirement for Prior Plan 

Fiduciary Breaches: As discussed earlier 

in this preamble, the proposed 

amendments would require qualified 

termination administrators to chapter 7 

plans (whether they are bankruptcy 

trustees or eligible designees) to report 

to the Department known delinquent 

contributions (employer and employee) 

owed to the plan, and any activity that 

the qualified termination administrator 

believes may be evidence of other 

fiduciary breaches by a prior plan 

fiduciary that involve plan assets. This 

information must be reported in 

conjunction with the filing of the final 

notice or notice of plan abandonment. If 

a bankruptcy trustee designates an 

eligible designee as defined in 

paragraph (j)(1)(ii) of the proposal, the 

bankruptcy trustee shall provide the 

eligible designee with records under the 

control of the bankruptcy trustee to 

enable the eligible designee to carry out 

its responsibilities. If, after the eligible 

designee completes the winding up of 

the plan, the bankruptcy trustee, in 

administering the debtor’s estate, 

discovers additional information that it 

believes may be evidence of fiduciary 

breaches by a prior plan fiduciary that 

involve plan assets, the bankruptcy 

trustee shall report such activity to the 

Department. 

While the Department has no basis for 

estimating the percentage of 

arrangements where the qualified 

termination administrator must report 

known delinquent contributions or a 

past fiduciary breach, the Department 

assumes for purposes of this analysis 

that a report will be required in 10 

percent of the applications from chapter 

7 plans. Thus, given that there are an 

estimated 165 chapter 7 plans utilizing 

the exemption, the Department 

estimates that 17 plans will need to 

prepare and send this notice. The 

Department anticipates that one-half 

hour of a financial professional’s time 

will be required to prepare the notice 

and five minutes of clerical time will be 

required to send the notice. The 

Department therefore estimates that the 

burden for plans to send the notice to 

EBSA’s Office of Enforcement will be 

approximately 10 hours (17 plans × (.5 

financial professional hours per plan + 

.0833 clerical hours per plan)) with a 

cost of $600 for trustees (17 plans × .5 

financial professional hours × $66.36/ 

hour + 17 plans × .0833 clerical hours 

× $28.21/hour) to send the notice. The 

Department anticipates that most of 

these notices will be filed with the final 

notice; therefore, this analysis includes 

no additional mailing cost. Each notice 

is expected to cost $0.10 (2 × $0.05). The 

Department estimates that 70 percent of 

the plans are expected to submit the 

final filing by mail, resulting in an 

additional material cost burden of $1.19 

(17 × .7 fraction submitting by mail × 

$.10). Thus, this new requirement 

amounts to a cost burden of 

approximately $600, which is 

exclusively imposed on chapter 7 plans. 

Special Terminal Report for 

Abandoned Plans (29 CFR 2520.103– 

13): The Department estimates that it 

will take small plans 3.25 hours to file 

the STRAP in accordance with the 

instructions on the Department’s web 

site. It is assumed that a financial 

accounting professional will perform 

this task resulting in an hour burden of 

1,600 hours and a cost burden of $66.36 

per hour resulting in a cost burden of 

$106,800 (3.25 hours × $66.36 per hour 

× 495 plans). For STRAPs submitted 

electronically, no burden is estimated 

for paper or mailing costs. For the 

assumed 70 percent of plans that submit 

their STRAPs by mail, the additional 

costs will be approximately $100 (495 

plans × 6 pages per terminal report × 

$.05/page × .70 fraction of plans that 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74075 

25These estimates for the number of participants 

and sponsors are based on 2008 Form 5500 Data 

filings. 

submit final notices by mail). Thus, the 

total cost associated with the report is 

approximately $106,800 ($106,700 in 

financial accounting costs and $100 in 

material costs). Of this total, $35,600 is 

attributable to the 1⁄3 of plans that are 

chapter 7 plans and $71,200 is 

attributable to the 1⁄3 of plans that are 

abandoned. Only the chapter 7 plan 

costs represent new costs. 

Safe Harbor for Distributions from 

Terminated Individual Account Plans 

(29 CFR 2550.404a–3): The PRA 

analysis also includes the burden 

associated with the notice to 

participants as required under ‘‘The 

Safe Harbor for Distributions from 

Terminated Individual Account Plans.’’ 

To meet the safe harbor, fiduciaries of 

terminating plans (other than 

abandoned plans) must furnish a notice 

to participants and beneficiaries 

informing them of the plan’s 

termination and the options available 

for distribution of their account 

balances. The Department estimates that 

3.1 million participants and 

beneficiaries will receive notices from 

approximately 39,000 plan sponsors.25

The Department estimates that clerical 

professionals will spend, on average, 

two minutes per notice preparing and 

distributing the notices. The benefits 

manager will spend approximately 10 

minutes preparing the notice. This 

results in an equivalent cost burden of 

$3.5 million calculated as follows: $2.92 

million per year (3.1 million 

participants × .033 hours per participant 

× $28.21 per hour) in clerical time, and 

$607,000 (39,000 plans × .167 hours per 

plan × $93.31 per hour) in benefit 

manager costs. In addition, the 

Department assumes that each 

participant will receive a one page 

notice by first class mail resulting in a 

cost burden of $961,000 (3.1 million 

notices × ($0.45 for postage + ($0.05 per 

page × 1 page) × 0.62). Thus, with the 

updated numbers, total cost burden for 

terminating plans is $4.48 million. This 

total includes $3.49 million in 

equivalent costs from plan clerical time 

($2.92 million) and plan benefit 

manager time ($607,000). There is also 

$961,000 in cost attributable to mailing 

the notices. These costs are not 

attributable to the proposed 

amendments allowing chapter 7 trustees 

to participate in the Abandoned Plan 

Program. They reflect the Department’s 

revised estimates of the entire 

Abandoned Plans Program and take into 

account the most recent Form 5500 data. 

Abandoned Plan Class Exemption, 

PTE 2006–06: PTE 2006–06 permits a 

qualified termination administrator of 

an individual account plan that has 

been abandoned by its sponsoring 

employer to select itself or an affiliate to 

provide services to the plan in 

connection with the termination of the 

plan, and to pay itself or an affiliate fees 

for these services, provided that such 

fees are consistent with the conditions 

of the exemption. The exemption also 

permits a qualified termination 

administrator to: designate itself or an 

affiliate as a provider of an individual 

retirement plan or other account; select 

a proprietary investment product as the 

initial investment for the rollover 

distribution of benefits for a participant 

or beneficiary who fails to make an 

election regarding the disposition of 

such benefits; and pay itself or its 

affiliate in connection with the rollover. 

Currently, PTE 2006–06 and the 

accompanying Abandoned Plan 

Regulations do not cover plans of 

sponsors involved in chapter 7 

bankruptcy proceedings. In this regard, 

bankruptcy trustees do not meet the 

definition of qualified termination 

administrator as set forth in the existing 

Abandoned Plan Regulations and the 

class exemption. The proposed 

amendments expand the definition of 

qualified termination administrator to 

include bankruptcy trustees and certain 

persons designated by them to act as 

qualified termination administrators in 

terminating and winding up the affairs 

of abandoned plans. The Department 

believes that the proposed amendments 

to the Abandoned Plan Regulations and 

PTE 2006–06 will incentivize many 

bankruptcy trustees to carryout plan 

terminations consistent with ERISA, 

which will ultimately benefit 

participants and beneficiaries of such 

plans by ensuring abandoned plans are 

terminated in an orderly and costeffective manner. 

Compliance with the proposed 

amendments to the Abandoned Plan 

Regulations is a condition of the 

proposed amendment to the class 

exemption; therefore the costs and 

benefits that would be associated with 

complying with the proposed 

amendment to the class exemption have 

been described and quantified in 

connection with the economic impact of 

the proposed regulatory amendments. In 

its current and proposed amendment 

form, PTE 2006–06 requires, among 

other things, that fees and expenses paid 

to the qualified termination 

administrator and an affiliate in 

connection with the termination of an 

abandoned plan are consistent with 

industry rates for such or similar 

services, and are not in excess of rates 

ordinarily charged by the qualified 

termination administrator (or affiliate) 

for the same or similar services 

provided to customers that are not plans 

terminated pursuant to the Abandoned 

Plan Regulations, if the qualified 

termination administrator (or affiliate) 

provides the same or similar services to 

such other customers. The class 

exemption, in its current and proposed 

amendment form, also requires that 

qualified termination administrators 

ensure that the records necessary to 

determine whether the conditions of the 

exemption have been met are 

maintained for a period of six years, so 

that they may be available for inspection 

by any account holder of an individual 

retirement plan or other account 

established pursuant to this exemption, 

or any duly authorized representative of 

such account holder, the Internal 

Revenue Service, and the Department. 

Banks, insurance companies, and other 

financial institutions that provide 

services to abandoned plans and their 

participants and beneficiaries are 

required to act in accordance with 

customary business practices, which 

would include maintaining the records 

required under the terms of the class 

exemption, both in its current and 

proposed amendment form. 

Accordingly, the recordkeeping burden 

attributable to the proposed amendment 

will be handled by the qualified 

termination administrator and is 

expected to be small. However, there is 

an additional cost to directing this 

process. The Department assumes that a 

supervisor must devote time to each 

case in order to study the details of the 

individual plan, determine whether 

there have been any violations, and 

ensure that these details are properly 

incorporated into the notices. Assuming 

that all qualified termination 

administrators will take advantage of 

the proposed exemption, the hour 

burden attributable to supervisory 

duties for qualified termination 

administrators of abandoned plans 

(including familiarization costs for new 

qualified termination administrators) is 

expected to be one half hour for each 

qualified termination administrator, or 

248 hours. Assuming a financial 

manager’s wage rate of $113.39 per 

hour, this supervisory cost is expected 

to total $28,100 ($113.39 × 248). 

Approximately $9,400 of this cost (1⁄3 of 

the costs since 165 of the 495 estimated 

affected plans are chapter 7 plans) is 

expected to be attributable to financial 

manager costs dealing with chapter 7 

plans and the remaining $18,700 of 

costs are attributable to financial 


emcdonald on DSK67QTVN1PROD with 
74076 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

managers dealing with the 2⁄3 of 

abandoned plans. 

Also, in certain limited 

circumstances, both the current 

exemption and proposed amendment to 

PTE 2006–06 require qualified 

termination administrators to provide 

the Department with a statement under 

penalty of perjury that services were 

performed and a copy of the executed 

contract between the qualified 

termination administrator and a plan 

fiduciary or plan sponsor. The 

Department does not include burden for 

these requirements as the burden is 

small, and the statement and contract 

can be included with other notices sent 

to the Department. 

Type of Review: Proposed Revision of 

Existing Collection. 

Agency: Employee Benefits Security 

Administration, Department of Labor. 

Title: Notices for Terminated 

Abandoned Individual Account Plans. 

OMB Number: 1210–0127 

Affected public: Individuals or 

households; business or other for-profit; 

not-for-profit institutions. 

Respondents: 39,495. 

Responses: 3,103,960. 

Frequency of Response: One time. 

Estimated Total Burden Hours: 

109,833. 

Equivalent Costs of Hour Burden: 

$3,520,000. 

Cost Burden: $ 1,150,000. 

7. Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) and 

which are likely to have a significant 

economic impact on a substantial 

number of small entities. Unless an 

agency determines that a proposed rule 

is not likely to have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

the RFA requires that the agency present 

an initial regulatory flexibility analysis 

at the time of the publication of the 

notice of proposed rulemaking 

describing the impact of the rule on 

small entities and seeking public 

comment on such impact. Small entities 

include small businesses, organizations 

and governmental jurisdictions. 

For purposes of analysis under the 

RFA, EBSA proposes to continue to 

consider a small entity to be an 

employee benefit plan with fewer than 

100 participants. The basis of this 

definition is found in section 104(a)(2) 

of ERISA that permits the Secretary of 

Labor to prescribe simplified annual 

reports for pension plans that cover 

fewer than 100 participants. Under 

section 104(a)(3), the Secretary may also 

provide for exemptions or simplified 

annual reporting and disclosure for 

welfare benefit plans. Pursuant to the 

authority of section 104(a)(3), the 

Department has previously issued at 29 

CFR 2520.104–20, 2520.104–21, 

2520.104–41, 2520.104–46 and 

2520.104b–10 certain simplified 

reporting provisions and limited 

exemptions from reporting and 

disclosure requirements for small plans, 

including unfunded or insured welfare 

plans, covering fewer than 100 

participants and which satisfy certain 

other requirements. 

Further, while some large employers 

may have small plans, in general small 

employers maintain most small plans. 

Thus, EBSA believes that assessing the 

impact of these proposed rules on small 

plans is an appropriate substitute for 

evaluating the effect on small entities. 

The definition of small entity 

considered appropriate for this purpose 

differs, however, from a definition of 

small business which is based on size 

standards promulgated by the Small 

Business Administration (SBA) (13 CFR 

121.201) pursuant to the Small Business 

Act (15 U.S.C. 631 et seq.). EBSA 

therefore requests comments on the 

appropriateness of the size standard 

used in evaluating the impact of these 

proposed rules on small entities. 

EBSA has preliminarily determined 

that these proposed rules may have a 

significant beneficial economic impact 

on a substantial number of small 

entities. In an effort to provide a sound 

basis for this conclusion, EBSA has 

prepared the following initial regulatory 

flexibility analysis. To the Department’s 

knowledge, there are no federal 

regulations that might duplicate, 

overlap, or conflict with the provisions 

of the proposed amendments to the 

Abandoned Plan Regulations. 

As explained earlier in the preamble, 

currently, the Abandoned Plan Program 

does not extend to plans sponsored by 

employers undergoing liquidation under 

chapter 7 of title 11 of the United States 

Code. Over the years, the Department 

has observed that, on numerous 

occasions, bankruptcy trustees have not 

terminated abandoned plans in an 

orderly and efficient manner. In many 

instances, such trustees are unaware of 

their fiduciary obligations under ERISA 

with respect to terminating plans of 

debtors and processes through which to 

wind up such plans. 

The Department believes that the 

participants and beneficiaries would 

benefit from removing existing 

impediments that prevent chapter 7 

bankruptcy trustees from terminating 

and winding up abandoned plans. 

Therefore, the Department is proposing 

to amend the Abandoned Plan 

Regulations (the three regulations and 

the related class exemption) to enable 

bankruptcy trustees to terminate 

abandoned plans in a manner consistent 

with ERISA and current regulations. 

The amendments would provide 

bankruptcy trustees with the option to 

serve as qualified termination 

administrators or to designate as a 

qualified termination administrator any 

person or entity that is eligible to serve 

as a trustee or issuer of an individual 

retirement plan and that holds assets of 

the chapter 7 plan. The Department 

believes that these amendments will 

help to preserve the assets of such 

abandoned plans, thereby maximizing 

benefits ultimately payable to 

participants and beneficiaries. 

As described earlier in the preamble, 

the Department estimates that 330 

abandoned plans (other than chapter 7 

plans) would file under the Abandoned 

Plan Program. Essentially all abandoned 

plans are assumed to be small plans. 

Therefore, the more detailed discussion 

earlier in the preamble on the costs and 

benefits of the proposed amendments is 

applicable to this analysis of costs and 

benefits under the RFA. In summary, 

the net benefits of terminating an 

estimated 330 abandoned plans per year 

under the proposed amendments is 

$490,000. Thus, the estimated beneficial 

impact per plan is approximately $1,500 

($490,000/330 plans) before accounting 

for fees in individual retirement 

accounts to which participants and 

beneficiaries could rollover their 

distributed account balances. This net 

benefit analysis is an update of the 2006 

estimate, with new information 

submitted to the Department’s Office of 

Enforcement informing the analysis. 

8. Congressional Review Act 

This proposed amendment is subject 

to the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and, if 

finalized, will be transmitted to the 

Congress and the Comptroller General 

for review. 

9. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), as well as Executive Order 

12875, the proposed rule does not 

include any Federal mandate that will 

result in expenditures by state, local, or 

tribal governments in the aggregate of 

more than $100 million, adjusted for 

inflation, or increase expenditures by 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74077 

the private sector of more than $100 

million, adjusted for inflation. 

10. Federalism Statement 

Executive Order 13132 (August 4, 

1999) outlines fundamental principles 

of federalism and requires the 

adherence to specific criteria by Federal 

agencies in the process of their 

formulation and implementation of 

policies that have substantial direct 

effects on the States, the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. This 

proposed rule does not have federalism 

implications because it has no 

substantial direct effect on the States, on 

the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Section 514 of 

ERISA provides, with certain exceptions 

specifically enumerated, that the 

provisions of Titles I and IV of ERISA 

supersede any and all laws of the States 

as they relate to any employee benefit 

plan covered under ERISA. The 

requirements implemented in the 

proposed rule do not alter the 

fundamental provisions of the statute 

with respect to employee benefit plans, 

and as such would have no implications 

for the States or the relationship or 

distribution of power between the 

national government and the States. 

List of Subjects 

29 CFR Part 2520 

Accounting, Employee benefit plans, 

Pensions, Reporting and recordkeeping 

requirements. 

29 CFR Part 2550 

Employee benefit plans, Employee 

Retirement Income Security Act, 

Employee stock ownership plans, 

Exemptions, Fiduciaries, Investments, 

Investments foreign, Party in interest, 

Pensions, Pension and Welfare Benefit 

Programs Office, Prohibited 

transactions, Real estate, Securities, 

Surety bonds, Trusts and Trustees. 

29 CFR Part 2578 

Employee benefit plans, Pensions, 

Retirement. 

For the reasons set forth in the 

preamble, the Department of Labor 

proposes to amend 29 CFR chapter XXV 

as follows: 

PART 2520—RULES AND 

REGULATIONS FOR REPORTING AND 

DISCLOSURE 

1. The authority citation for part 2520 

is revised to read as follows: 

Authority: 29 U.S.C. 1021–1025, 1027, 

1029–31, 1059, 1134 and 1135; and Secretary 

of Labor’s Order 1–2011, 77 FR 1088 (Jan. 9, 

2012). Sec. 2520.101–2 also issued under 29 

U.S.C. 1132, 1181–1183, 1181 note, 1185, 

1185a–b, 1191, and 1191a–c. Sec. 2520.101– 

4 also issued under 29 U.S.C. 1021(f). Sec. 

2520.101–6 also issued under 29 U.S.C. 

1021(k) and Pub. L. 109–280, § 502(a)(3), 120 

Stat. 780, 940 (2006). Secs. 2520.102–3, 

2520.104b–1 and 2520.104b–3 also issued 

under 29 U.S.C. 1003, 1181–1183, 1181 note, 

1185, 1185a–b, 1191, and 1191a–c. Secs. 

2520.104b–1 and 2520.107 also issued under 

26 U.S.C. 401 note, 111 Stat. 788. 

2. Revise § 2520.103–13 to read as 

follows: 

§ 2520.103–13 Special terminal report for 

abandoned plans. 

(a) General. The terminal report 

required to be filed by the qualified 

termination administrator pursuant to 

§ 2578.1(d)(2)(viii) of this chapter shall 

consist of the items set forth in 

paragraph (b) of this section. Such 

report shall be filed in accordance with 

the method of filing set forth in 

paragraph (c) of this section and at the 

time set forth in paragraph (d) of this 

section. 

(b) Contents. The terminal report 

described in paragraph (a) of this 

section shall contain: 

(1) Identification information 

concerning the bankruptcy trustee and, 

if applicable, any eligible designee 

acting as the qualified termination 

administrator pursuant to 

§ 2578.1(j)(1)(ii), and the plan being 

terminated. 

(2) The total assets of the plan as of 

the date the plan was deemed 

terminated under § 2578.1(c) of this 

chapter, prior to any reduction for 

termination expenses and distributions 

to participants and beneficiaries. 

(3) The total termination expenses 

paid by the plan and a separate 

schedule identifying each service 

provider and amount received, itemized 

by expense. 

(4) The total distributions made 

pursuant to § 2578.1(d)(2)(vii) of this 

chapter and a statement regarding 

whether any such distributions were 

transfers under § 2578.1(d)(2)(vii)(B) of 

this chapter. 

(5) The identification, fair market 

value and method of valuation of any 

assets with respect to which there is no 

readily ascertainable fair market value. 

(c) Method of filing. The terminal 

report described in paragraph (a) shall 

be filed: 

(1) On the most recent Form 5500 

available as of the date the qualified 

termination administrator satisfies the 

requirements in § 2578.1(d)(2)(i) 

through § 2578.1(d)(2)(vii) of this 

chapter; and 

(2) In accordance with the 

instructions on EBSA’s Web site 

(http://www.dol.gov/ebsa/publications/ 

APterminalreport.html) pertaining to 

terminal reports of qualified termination 

administrators. 

(d) When to file. The qualified 

termination administrator shall file the 

terminal report described in paragraph 

(a) within two months after the end of 

the month in which the qualified 

termination administrator satisfies the 

requirements in § 2578.1(d)(2)(i) 

through § 2578.1(d)(2)(vii) of this 

chapter. 

(e) Limitation. (1) Except as provided 

in this section, no report shall be 

required to be filed by the qualified 

termination administrator under part 1 

of title I of ERISA for a plan being 

terminated pursuant to § 2578.1 of this 

chapter. 

(2) Filing of a report under this 

section by the qualified termination 

administrator shall not relieve any other 

person from any obligation under part 1 

of title I of ERISA. 

PART 2550—RULES AND 

REGULATIONS FOR FIDUCIARY 

RESPONSIBILITY 

3. The authority citation for part 2550 

is revised to read as follows: 

Authority: 29 U.S.C. 1135, sec. 102, 

Reorganization Plan No. 4 of 1978, 5 U.S.C. 

App. 1 and Secretary of Labor’s Order No. 1– 

2011, 77 FR 1088 (Jan. 9, 2012). Sec. 

2550.401c–1 also issued under 29 U.S.C. 

1101. Sec. 2550.404a–2 also issued under 

sec. 657, Pub. L. 107–16, 115 Stat. 38. 

Sections 2550.404c–1 and 2550.404c–5 also 

issued under 29 U.S.C. 1104. Sec. 2550.408b– 

1 also issued under 29 U.S.C. 1108(b)(1). Sec. 

2550.408b–19 also issued under sec. 611, 

Pub. L. 109–280, 120 Stat. 780, 972. Sec. 

2550.412–1 also issued under 29 U.S.C. 1112. 

4. Revise § 2550.404a–3 to read as 

follows: 

§ 2550.404a–3 Safe harbor for 

distributions from terminated individual 

account plans. 

(a) General. (1) This section provides 

a safe harbor under which a fiduciary 

(including a qualified termination 

administrator, within the meaning of 

§ 2578.1(g) or (j)(1)(ii) of this chapter) of 

a terminated individual account plan, as 

described in paragraph (a)(2) of this 

section, will be deemed to have satisfied 

its duties under section 404(a) of the 

Employee Retirement Income Security 

Act of 1974, as amended (the Act)), 29 


emcdonald on DSK67QTVN1PROD with 
74078 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

U.S.C. 1001 et seq., in connection with 

a distribution described in paragraph (b) 

of this section. 

(2) This section shall apply to an 

individual account plan only if— 

(i) In the case of an individual 

account plan that is an abandoned plan 

within the meaning of § 2578.1 of this 

chapter, such plan was intended to be 

maintained as a tax-qualified plan in 

accordance with the requirements of 

section 401(a), 403(a), or 403(b) of the 

Internal Revenue Code of 1986 (Code); 

or 

(ii) In the case of any other individual 

account plan, such plan is maintained 

in accordance with the requirements of 

section 401(a), 403(a), or 403(b) of the 

Code at the time of the distribution. 

(3) The standards set forth in this 

section apply solely for purposes of 

determining whether a fiduciary meets 

the requirements of this safe harbor. 

Such standards are not intended to be 

the exclusive means by which a 

fiduciary might satisfy his or her 

responsibilities under the Act with 

respect to making distributions 

described in this section. 

(b) Distributions. This section shall 

apply to a distribution from a 

terminated individual account plan if, 

in connection with such distribution: 

(1) The participant or beneficiary, on 

whose behalf the distribution will be 

made, was furnished notice in 

accordance with paragraph (e) of this 

section or, in the case of an abandoned 

plan, § 2578.1(d)(2)(vi) of this chapter, 

and 

(2) The participant or beneficiary 

failed to elect a form of distribution 

within 30 days of the furnishing of the 

notice described in paragraph (b)(1) of 

this section. 

(c) Safe harbor. A fiduciary that meets 

the conditions of paragraph (d) of this 

section shall, with respect to a 

distribution described in paragraph (b) 

of this section, be deemed to have 

satisfied its duties under section 404(a) 

of the Act with respect to the 

distribution of benefits, selection of a 

transferee entity described in paragraph 

(d)(1)(i) through (iii) of this section, and 

the investment of funds in connection 

with the distribution. 

(d) Conditions. A fiduciary shall 

qualify for the safe harbor described in 

paragraph (c) of this section if: 

(1) The distribution described in 

paragraph (b) of this section is made to 

any of the following transferee entities— 

(i) To an individual retirement plan 

within the meaning of section 

7701(a)(37) of the Code; 

(ii) In the case of a distribution on 

behalf of a designated beneficiary (as 

defined by section 401(a)(9)(E) of the 

Code) who is not the surviving spouse 

of the deceased participant, to an 

inherited individual retirement plan 

(within the meaning of section 

402(c)(11) of the Code) established to 

receive the distribution on behalf of the 

nonspouse beneficiary; or 

(iii) In the case of a distribution by a 

qualified termination administrator 

(other than a bankruptcy trustee 

described in § 2578.1(j)(1)(ii)) with 

respect to which the amount to be 

distributed is $1,000 or less and that 

amount is less than the minimum 

amount required to be invested in an 

individual retirement plan product 

offered by the qualified termination 

administrator to the public at the time 

of the distribution, to: 

(A) An interest-bearing federally 

insured bank or savings association 

account in the name of the participant 

or beneficiary, 

(B) The unclaimed property fund of 

the State in which the participant’s or 

beneficiary’s last known address is 

located, or 

(C) An individual retirement plan 

(described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) offered by a 

financial institution other than the 

qualified termination administrator to 

the public at the time of the 

distribution. 

(iv) In the case of a distribution by a 

bankruptcy trustee as described in 

§ 2578.1(j)(1)(ii) with respect to which 

the amount to be distributed is $1,000 

or less and the bankruptcy trustee, after 

reasonable and good faith efforts, is 

unable to locate an individual 

retirement plan provider who will 

accept the distribution, to either 

distribution option described in 

paragraph (d)(1)(iii)(A) or (B) of this 

section. 

(v) Notwithstanding paragraphs 

(d)(1)(iii) and (iv) of this section, the 

$1,000 threshold may be disregarded in 

any particular case if the qualified 

termination administrator reasonably 

and in good faith finds that the 

participant and, if applicable, the 

named beneficiary are deceased; and if 

the qualified termination administrator 

also includes in the notice described in 

§ 2578.1(d)(2)(ix)(G) (the Final Notice) 

the identity of the deceased participant 

and beneficiary and the basis behind the 

finding. 

(2) Except with respect to 

distributions to State unclaimed 

property funds (described in paragraph 

(d)(1)(iii)(B) of this section), the 

fiduciary enters into a written 

agreement with the transferee entity 

which provides: 

(i) The distributed funds shall be 

invested in an investment product 

designed to preserve principal and 

provide a reasonable rate of return, 

whether or not such return is 

guaranteed, consistent with liquidity 

(except that distributions under 

paragraph (d)(1)(iii)(A) of this section to 

a bank or savings account are not 

required to be invested in such a 

product); 

(ii) For purposes of paragraph (d)(2)(i) 

of this section, the investment product 

shall— 

(A) Seek to maintain, over the term of 

the investment, the dollar value that is 

equal to the amount invested in the 

product by the individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section), and 

(B) Be offered by a State or federally 

regulated financial institution, which 

shall be: a bank or savings association, 

the deposits of which are insured by the 

Federal Deposit Insurance Corporation; 

a credit union, the member accounts of 

which are insured within the meaning 

of section 101(7) of the Federal Credit 

Union Act; an insurance company, the 

products of which are protected by State 

guaranty associations; or an investment 

company registered under the 

Investment Company Act of 1940; 

(iii) All fees and expenses attendant to 

the transferee plan (described in 

paragraph (d)(1)(i) or (d)(1)(ii) of this 

section) or account (described in 

paragraph (d)(1)(iii)(A) of this section), 

including investments of such plan, 

(e.g., establishment charges, 

maintenance fees, investment expenses, 

termination costs and surrender 

charges), shall not exceed the fees and 

expenses charged by the provider of the 

plan or account for comparable plans or 

accounts established for reasons other 

than the receipt of a distribution under 

this section; and 

(iv) The participant or beneficiary on 

whose behalf the fiduciary makes a 

distribution shall have the right to 

enforce the terms of the contractual 

agreement establishing the plan 

(described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) or account 

(described in paragraph (d)(1)(iii)(A) of 

this section), with regard to his or her 

transferred account balance, against the 

plan or account provider. 

(3) Both the fiduciary’s selection of a 

transferee plan (described in paragraph 

(d)(1)(i) or (d)(1)(ii) of this section) or 

account (described in paragraph 

(d)(1)(iii)(A) of this section) and the 

investment of funds would not result in 

a prohibited transaction under section 

406 of the Act, or if so prohibited such 

actions are exempted from the 

prohibited transaction provisions by a 

prohibited transaction exemption issued 

pursuant to section 408(a) of the Act. 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74079 

(e) Notice to participants and 

beneficiaries. (1) Content. Each 

participant or beneficiary of the plan 

shall be furnished a notice written in a 

manner calculated to be understood by 

the average plan participant and 

containing the following: 

(i) The name of the plan; 

(ii) A statement of the account 

balance, the date on which the amount 

was calculated, and, if relevant, an 

indication that the amount to be 

distributed may be more or less than the 

amount stated in the notice, depending 

on investment gains or losses and the 

administrative cost of terminating the 

plan and distributing benefits; 

(iii) A description of the distribution 

options available under the plan and a 

request that the participant or 

beneficiary elect a form of distribution 

and inform the plan administrator (or 

other fiduciary) identified in paragraph 

(e)(1)(vii) of this section of that election; 

(iv) A statement explaining that, if a 

participant or beneficiary fails to make 

an election within 30 days from receipt 

of the notice, the plan will distribute the 

account balance of the participant or 

beneficiary to an individual retirement 

plan (i.e., individual retirement account 

or annuity described in paragraph 

(d)(1)(i) or (d)(1)(ii) of this section) and 

the account balance will be invested in 

an investment product designed to 

preserve principal and provide a 

reasonable rate of return and liquidity; 

(v) A statement explaining what fees, 

if any, will be paid from the participant 

or beneficiary’s individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section), if such 

information is known at the time of the 

furnishing of this notice; 

(vi) The name, address and phone 

number of the individual retirement 

plan (described in paragraph (d)(1)(i) or 

(d)(1)(ii) of this section) provider, if 

such information is known at the time 

of the furnishing of this notice; and 

(vii) The name, address, and 

telephone number of the plan 

administrator (or other fiduciary) from 

whom a participant or beneficiary may 

obtain additional information 

concerning the termination. 

(2) Manner of furnishing notice. (i) 

For purposes of paragraph (e)(1) of this 

section, a notice shall be furnished to 

each participant or beneficiary in 

accordance with the requirements of 

§ 2520.104b–1(b)(1) of this chapter to 

the last known address of the 

participant or beneficiary; and 

(ii) In the case of a notice that is 

returned to the plan as undeliverable, 

the plan fiduciary shall, consistent with 

its duties under section 404(a)(1) of 

ERISA, take steps to locate the 

participant or beneficiary and provide 

notice prior to making the distribution. 

If, after such steps, the fiduciary is 

unsuccessful in locating and furnishing 

notice to a participant or beneficiary, 

the participant or beneficiary shall be 

deemed to have been furnished the 

notice and to have failed to make an 

election within 30 days for purposes of 

paragraph (b)(2) of this section. 

(f) Model notice. The appendix to this 

section contains a model notice that 

may be used to discharge the 

notification requirements under this 

section. Use of the model notice is not 

mandatory. However, use of an 

appropriately completed model notice 

will be deemed to satisfy the 

requirements of paragraph (e)(1) of this 

section. 

BILLING CODE 4510–29–P 


emcdonald on DSK67QTVN1PROD with 
74080 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

BILLING CODE 4510–29–C 


emcdonald on DSK67QTVN1PROD with EP12DE12.000</GPH>

[Date of notice] 

APPENDIX TO § 2550A04a-3 

NOTICE OF PLAN TERMINATION 

[Name and last known address o..fplan participant or beneficiary] 

Re: [Name of plan] 

Dear [Name of plan participant or beneficiary]: 

This notice is to inform you that [name of the plan] (the Plan) has been terminated and we are in 

the process of winding it up. 

We have determined that you have an interest in the Plan, either as a plan participant or 

beneficiary. Your account balance in the Plan on [date] is/was [account balance]. We will be 

distributing this money as permitted under the terms of the Plan and federal regulations. {If 

applicable, insert the following sentence: The actual amount of your distribution may be more or 

less than the amount stated in this notice depending on investment gains or losses and the 

administrative cost of terminating your plan and distributing your benefits.} 

Your distribution options under the Plan are {add a description of the Plan's distribution 

options}. It is very important that you elect one of these forms of distribution and inform us of 

your election. The process for informing us of this election is {enter a description of the Plan's 

election process}. 

If you do not make an election within 30 days from your receipt of this notice, your account 

balance will be transferred directly to an individual retirement plan (inherited individual 

retirement plan in the case of a nonspouse beneficiary). {If the name of the provider of the 

individual retirement plan is known, include the following sentence: The name of the provider of 

the individual retirement plan is [name, address and phone number of the individual retirement 

plan provider].} Pursuant to federal law, your money in the individual retirement plan would 

then be invested in an investment product designed to preserve principal and provide a 

reasonable rate of return and liquidity. {If fee information is known, include the following 

sentence: Should your money be transferred into an individual retirement plan, [name of the 

financial institution] charges the following fees for its services: {add a statement offees, if any, 

that will be paid from the participant or beneficiary's individual retirement plan}. } 

For more information about the termination, your account balance, or distribution options, please 

contact [name, address, and telephone number of the plan administrator or other appropriate 

contact person]. 

Sincerely, 

[Name o..fplan administrator or appropriate designee] 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74081 

PART 2578—RULES AND 

REGULATIONS FOR ABANDONED 

PLANS 

5. The authority citation for part 

2578.1 continues to read as follows: 

Authority: 29 U.S.C. 1135; 1104(a); 

1103(d)(1). 

6. Revise § 2578.1 to read as follows: 

§ 2578.1 Termination of abandoned 

individual account plans. 

(a) General. The purpose of this part 

is to establish standards for the 

termination and winding up of an 

individual account plan (as defined in 

section 3(34) of the Employee 

Retirement Income Security Act of 1974 

(ERISA or the Act)) with respect to 

which (1) a qualified termination 

administrator has determined there is 

no responsible plan sponsor or plan 

administrator within the meaning of 

section 3(16)(B) and (A) of the Act, 

respectively, to perform such acts, or (2) 

an order for relief under chapter 7 of 

title 11 of the United States Code has 

been entered with respect to the plan 

sponsor. 

(b) Finding of abandonment. (1) A 

qualified termination administrator (as 

defined in paragraph (g) of this section) 

may find an individual account plan to 

be abandoned when: 

(i) Either: (A) No contributions to, or 

distributions from, the plan have been 

made for a period of at least 12 

consecutive months immediately 

preceding the date on which the 

determination is being made; or 

(B) Other facts and circumstances 

(such as communications from 

participants and beneficiaries regarding 

distributions) known to the qualified 

termination administrator suggest that 

the plan is or may become abandoned 

by the plan sponsor; and 

(ii) Following reasonable efforts to 

locate or communicate with the plan 

sponsor, the qualified termination 

administrator determines that the plan 

sponsor: 

(A) No longer exists; 

(B) Cannot be located; or 

(C) Is unable to maintain the plan. 

(2) Notwithstanding paragraph (b)(1) 

of this section, a qualified termination 

administrator may not find a plan to be 

abandoned if, at any time before the 

plan is deemed terminated pursuant to 

paragraph (c) of this section, the 

qualified termination administrator 

receives an objection from the plan 

sponsor regarding the finding of 

abandonment and proposed 

termination. 

(3) A qualified termination 

administrator shall, for purposes of 

paragraph (b)(1)(ii) of this section, be 

deemed to have made a reasonable effort 

to locate or communicate with the plan 

sponsor if the qualified termination 

administrator sends to the last known 

address of the plan sponsor, and, in the 

case of a plan sponsor that is a 

corporation, to the address of the person 

designated as the corporation’s agent for 

service of legal process, by a method of 

delivery requiring acknowledgement of 

receipt, the notice described in 

paragraph (b)(5) of this section. 

(4) If receipt of the notice described in 

paragraph (b)(5) of this section is not 

acknowledged pursuant to paragraph 

(b)(3) of this section, the qualified 

termination administrator shall be 

deemed to have made a reasonable effort 

to locate or communicate with the plan 

sponsor if the qualified termination 

administrator contacts known service 

providers (other than itself) of the plan 

and requests the current address of the 

plan sponsor from such service 

providers and, if such information is 

provided, the qualified termination 

administrator sends to each such 

address, by a method of delivery 

requiring acknowledgement of receipt, 

the notice described in paragraph (b)(5) 

of this section. 

(5) The notice referred to in paragraph 

(b)(3) of this section shall contain the 

following information: 

(i) The name and address of the 

qualified termination administrator; 

(ii) The name of the plan; 

(iii) The account number or other 

identifying information relating to the 

plan; 

(iv) A statement that the plan may be 

terminated and benefits distributed 

pursuant to 29 CFR 2578.1 if the plan 

sponsor fails to contact the qualified 

termination administrator within 30 

days; 

(v) The name, address, and telephone 

number of the person, office, or 

department that the plan sponsor must 

contact regarding the plan; 

(vi) A statement that if the plan is 

terminated pursuant to 29 CFR 2578.1, 

notice of such termination will be 

furnished to the U.S. Department of 

Labor’s Employee Benefits Security 

Administration; 

(vii) The following statement: ‘‘The 

U.S. Department of Labor requires that 

you be informed that, as a fiduciary or 

plan administrator or both, you may be 

personally liable for costs, civil 

penalties, excise taxes, etc. as a result of 

your acts or omissions with respect to 

this plan. The termination of this plan 

will not relieve you of your liability for 

any such costs, penalties, taxes, etc.’’; 

and 

(viii) A statement that the plan 

sponsor may contact the U.S. 

Department of Labor for more 

information about the federal law 

governing the termination and windingup process for abandoned plans and the 

telephone number of the appropriate 

Employee Benefits Security 

Administration contact person. 

(c) Deemed termination. (1) Except as 

provided in paragraph (c)(2) of this 

section, if a qualified termination 

administrator finds (pursuant to 

paragraph (b)(1) of this section) that an 

individual account plan has been 

abandoned, or if a plan is considered 

abandoned due to the entry of an order 

for relief under chapter 7 of title 11 of 

the United States Code (pursuant to 

paragraph (j)(1)(i) of this section), the 

plan shall be deemed to be terminated 

on the ninetieth (90th) day following the 

date of the letter from EBSA 

acknowledging receipt of the notice of 

plan abandonment, described in 

paragraph (c)(3) or (j)(2) of this section. 

(2) If, prior to the end of the 90-day 

period described in paragraph (c)(1) of 

this section, the Department notifies the 

qualified termination administrator that 

it— 

(i) Objects to the termination of the 

plan, the plan shall not be deemed 

terminated under paragraph (c)(1) of 

this section until the qualified 

termination administrator is notified 

that the Department has withdrawn its 

objection; or 

(ii) Waives the 90-day period 

described in paragraph (c)(1), the plan 

shall be deemed terminated upon the 

qualified termination administrator’s 

receipt of such notification. 

(3) Following a qualified termination 

administrator’s finding, pursuant to 

paragraph (b)(1) this section, that an 

individual account plan has been 

abandoned, the qualified termination 

administrator shall furnish to the U.S. 

Department of Labor a notice of plan 

abandonment that is signed and dated 

by the qualified termination 

administrator and that includes the 

following information: 

(i) Qualified termination 

administrator information. (A) The 

name, EIN, address, and telephone 

number of the person electing to be the 

qualified termination administrator, 

including the address, email address, 

and telephone number of the person 

signing the notice (or other contact 

person, if different from the person 

signing the notice); 

(B) A statement that the person 

(identified in paragraph (c)(3)(i)(A) of 

this section) is a qualified termination 

administrator within the meaning of 

paragraph (g) of this section and elects 

to terminate and wind up the plan 

(identified in paragraph (c)(3)(ii)(A) of 


emcdonald on DSK67QTVN1PROD with 
74082 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

this section) in accordance with the 

provisions of this section; 

(ii) Plan information. (A) The name, 

address, telephone number, account 

number, EIN, and plan number of the 

plan with respect to which the person 

is electing to serve as the qualified 

termination administrator; 

(B) The name and last known address 

and telephone number of the plan 

sponsor; and 

(C) The estimated number of 

participants and beneficiaries with 

accounts in the plan; 

(iii) Findings. A statement that the 

person electing to be the qualified 

termination administrator finds that the 

plan (identified in paragraph 

(c)(3)(ii)(A) of this section) is abandoned 

pursuant to paragraph (b) of this section. 

This statement shall include an 

explanation of the basis for such a 

finding, specifically referring to the 

provisions in paragraph (b)(1) of this 

section, a description of the specific 

steps (set forth in paragraphs (b)(3) and 

(b)(4) of this section) taken to locate or 

communicate with the known plan 

sponsor, and a statement that no 

objection has been received from the 

plan sponsor; 

(iv) Plan asset information. (A) The 

estimated value of the plan’s assets held 

by the person electing to be the 

qualified termination administrator; 

(B) The length of time plan assets 

have been held by the person electing to 

be the qualified termination 

administrator, if such period of time is 

less than 12 months; 

(C) An identification of any assets 

with respect to which there is no readily 

ascertainable fair market value, as well 

as information, if any, concerning the 

value of such assets; and 

(D) An identification of known 

delinquent contributions pursuant to 

paragraph (d)(2)(iii) of this section; 

(v) Service provider information. (A) 

The name, address, and telephone 

number of known service providers 

(e.g., record keeper, accountant, lawyer, 

other asset custodian(s)) to the plan; and 

(B) An identification of any services 

considered necessary to carry out the 

qualified termination administrator’s 

authority and responsibility under this 

section, the name of the service 

provider(s) that is expected to provide 

such services, and an itemized estimate 

of expenses attendant thereto expected 

to be paid out of plan assets by the 

qualified termination administrator; and 

(vi) Perjury statement. A statement 

that the information being provided in 

the notice is true and complete based on 

the knowledge of the person electing to 

be the qualified termination 

administrator, and that the information 

is being provided by the qualified 

termination administrator under penalty 

of perjury. 

(d) Winding up the affairs of the plan. 

(1) In any case where an individual 

account plan is deemed to be terminated 

pursuant to paragraph (c) of this section, 

the qualified termination administrator 

shall take steps as may be necessary or 

appropriate to wind up the affairs of the 

plan and distribute benefits to the plan’s 

participants and beneficiaries. 

(2) For purposes of paragraph (d)(1) of 

this section, except as provided 

pursuant to paragraph (j)(3) of this 

section (relating to chapter 7 plans), the 

qualified termination administrator 

shall: 

(i) Update plan records. (A) 

Undertake reasonable and diligent 

efforts to locate and update plan records 

necessary to determine the benefits 

payable under the terms of the plan to 

each participant and beneficiary. 

(B) For purposes of paragraph 

(d)(2)(i)(A) of this section, a qualified 

termination administrator shall not have 

failed to make reasonable and diligent 

efforts to update plan records merely 

because the administrator determines in 

good faith that updating the records is 

either impossible or involves significant 

cost to the plan in relation to the total 

assets of the plan. 

(ii) Calculate benefits. Use reasonable 

care in calculating the benefits payable 

to each participant or beneficiary based 

on plan records described in paragraph 

(d)(2)(i) of this section. A qualified 

termination administrator shall not have 

failed to use reasonable care in 

calculating benefits payable solely 

because the qualified termination 

administrator— 

(A) Treats as forfeited an account 

balance that, taking into account 

estimated forfeitures and other assets 

allocable to the account, is less than the 

estimated share of plan expenses 

allocable to that account, and reallocates 

that account balance to defray plan 

expenses or to other plan accounts in 

accordance with (d)(2)(ii)(B) of this 

section; 

(B) Allocates expenses and 

unallocated assets in accordance with 

the plan documents, or, if the plan 

document is not available, is 

ambiguous, or if compliance with the 

plan is unfeasible, 

(1) Allocates unallocated assets 

(including forfeitures and assets in a 

suspense account) to participant 

accounts on a per capita basis (allocated 

equally to all accounts); and 

(2) Allocates expenses on a pro rata 

basis (proportionately in the ratio that 

each individual account balance bears 

to the total of all individual account 

balances) or on a per capita basis 

(allocated equally to all accounts). 

(iii) Report delinquent contributions. 

(A) Notify the Department of any known 

contributions (either employer or 

employee) owed to the plan in 

conjunction with the filing of the 

notification required in paragraph (c)(3), 

(j)(2), or (d)(2)(ix) of this section. 

(B) Except as provided in paragraph 

(j)(3)(i) of this section, nothing in 

paragraph (d)(2)(iii)(A) of this section or 

any other provision of the Act shall be 

construed to impose an obligation on 

the qualified termination administrator 

to collect delinquent contributions on 

behalf of the plan, provided that the 

qualified termination administrator 

satisfies the requirements of paragraph 

(d)(2)(iii)(A) of this section. 

(iv) Engage service providers. Engage, 

on behalf of the plan, such service 

providers as are necessary for the 

qualified termination administrator to 

wind up the affairs of the plan and 

distribute benefits to the plan’s 

participants and beneficiaries in 

accordance with paragraph (d)(1) of this 

section. 

(v) Pay reasonable expenses. (A) Pay, 

from plan assets, the reasonable 

expenses of carrying out the qualified 

termination administrator’s authority 

and responsibility under this section. 

(B) Expenses of plan administration 

shall be considered reasonable solely for 

purposes of paragraph (d)(2)(v)(A) of 

this section if: 

(1) Such expenses are for services 

necessary to wind up the affairs of the 

plan and distribute benefits to the plan’s 

participants and beneficiaries, 

(2) Such expenses: (i) Are consistent 

with industry rates for such or similar 

services, based on the experience of the 

qualified termination administrator; and 

(ii) Are not in excess of rates 

ordinarily charged by the qualified 

termination administrator (or affiliate) 

for same or similar services provided to 

customers that are not plans terminated 

pursuant to this section, if the qualified 

termination administrator (or affiliate) 

provides same or similar services to 

such other customers, and 

(3) The payment of such expenses 

would not constitute a prohibited 

transaction under the Act or is 

exempted from such prohibited 

transaction provisions pursuant to 

section 408(a) of the Act. 

(vi) Notify participants. (A) Furnish to 

each participant or beneficiary of the 

plan a notice written in a manner 

calculated to be understood by the 

average plan participant and containing 

the following: 

(1) The name of the plan; 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74083 

(2) A statement that the plan has been 

determined to be abandoned by the plan 

sponsor and, therefore, has been 

terminated pursuant to regulations 

issued by the U.S. Department of Labor; 

(3)(i) A statement of the participant’s 

or beneficiary’s account balance and the 

date on which it was calculated by the 

qualified termination administrator, and 

(ii) The following statement: ‘‘The 

actual amount of your distribution may 

be more or less than the amount stated 

in this letter depending on investment 

gains or losses and the administrative 

cost of terminating your plan and 

distributing your benefits.’’; 

(4) A description of the distribution 

options available under the plan and a 

request that the participant or 

beneficiary elect a form of distribution 

and inform the qualified termination 

administrator (or designee) of that 

election; 

(5) A statement explaining that, if a 

participant or beneficiary fails to make 

an election within 30 days from receipt 

of the notice, the qualified termination 

administrator (or designee) will 

distribute the account balance of the 

participant or beneficiary directly: 

(i) To an individual retirement plan 

(i.e., individual retirement account or 

annuity), 

(ii) To an inherited individual 

retirement plan described in 

§ 2550.404a–3(d)(1)(ii) of this chapter 

(in the case of a distribution on behalf 

of a distributee other than a participant 

or spouse), 

(iii) In any case where the amount to 

be distributed meets the conditions in 

§ 2550.404a–3(d)(1)(iii) or (iv), to an 

interest-bearing federally insured bank 

account, the unclaimed property fund of 

the State of the last known address of 

the participant or beneficiary, or an 

individual retirement plan (described in 

§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this 

chapter) or 

(iv) To an annuity provider in any 

case where the qualified termination 

administrator determines that the 

survivor annuity requirements in 

sections 401(a)(11) and 417 of the 

Internal Revenue Code (or section 205 of 

ERISA) prevent a distribution under 

paragraph (d)(2)(vii)(B)(1) of this 

section; 

(6) In the case of a distribution to an 

individual retirement plan (described in 

§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this 

chapter) a statement explaining that the 

account balance will be invested in an 

investment product designed to 

preserve principal and provide a 

reasonable rate of return and liquidity; 

(7) A statement of the fees, if any, that 

will be paid from the participant or 

beneficiary’s individual retirement plan 

(described in § 2550.404a–3(d)(1)(i) or 

(d)(1)(ii) of this chapter) or other 

account (described in § 2550.404a– 

3(d)(1)(iii)(A) of this chapter), if such 

information is known at the time of the 

furnishing of this notice; 

(8) The name, address and phone 

number of the provider of the individual 

retirement plan (described in 

§ 2550.404a–3(d)(1)(i) or (d)(1)(ii) of this 

chapter), qualified survivor annuity, or 

other account (described in 

§ 2550.404a–3(d)(1)(iii)(A) of this 

chapter), if such information is known 

at the time of the furnishing of this 

notice; and 

(9) The name, address, and telephone 

number of the qualified termination 

administrator and, if different, the 

name, address and phone number of a 

contact person (or entity) for additional 

information concerning the termination 

and distribution of benefits under this 

section. 

(B)(1) For purposes of paragraph 

(d)(2)(vi)(A) of this section, a notice 

shall be furnished to each participant or 

beneficiary in accordance with the 

requirements of § 2520.104b–1(b)(1) of 

this chapter to the last known address 

of the participant or beneficiary; and 

(2) In the case of a notice that is 

returned to the qualified termination 

administrator as undeliverable, the 

qualified termination administrator 

shall, consistent with the duties of a 

fiduciary under section 404(a)(1) of 

ERISA, take steps to locate and provide 

notice to the participant or beneficiary 

prior to making a distribution pursuant 

to paragraph (d)(2)(vii) of this section. If, 

after such steps, the qualified 

termination administrator is 

unsuccessful in locating and furnishing 

notice to a participant or beneficiary, 

the participant or beneficiary shall be 

deemed to have been furnished the 

notice and to have failed to make an 

election within the 30-day period 

described in paragraph (d)(2)(vii) of this 

section. 

(vii) Distribute benefits. (A) Distribute 

benefits in accordance with the form of 

distribution elected by each participant 

or beneficiary with spousal consent, if 

required. 

(B) If the participant or beneficiary 

fails to make an election within 30 days 

from the date the notice described in 

paragraph (d)(2)(vi) of this section is 

furnished, distribute benefits— 

(1) In accordance with § 2550.404a–3 

of this chapter; or 

(2) If a qualified termination 

administrator determines that the 

survivor annuity requirements in 

sections 401(a)(11) and 417 of the 

Internal Revenue Code (or section 205 of 

ERISA) prevent a distribution under 

paragraph (d)(2)(vii)(B)(1) of this 

section, in any manner reasonably 

determined to achieve compliance with 

those requirements. 

(C) For purposes of distributions 

pursuant to paragraph (d)(2)(vii)(B) of 

this section, the qualified termination 

administrator may designate itself (or an 

affiliate) as the transferee of such 

proceeds, and invest such proceeds in a 

product in which it (or an affiliate) has 

an interest, only if such designation and 

investment is exempted from the 

prohibited transaction provisions under 

the Act pursuant to section 408(a) of the 

Act. 

(viii) Special Terminal Report for 

Abandoned Plans. File the Special 

Terminal Report for Abandoned Plans 

in accordance with § 2520.103–13 of 

this chapter. 

(ix) Final Notice. No later than two 

months after the end of the month in 

which the qualified termination 

administrator satisfies the requirements 

in paragraph (d)(2)(i) through (d)(2)(vii) 

of this section, furnish to the Office of 

Enforcement, Employee Benefits 

Security Administration, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, a 

notice, signed and dated by the 

qualified termination administrator, 

containing the following information: 

(A) The name, EIN, address, email 

address, and telephone number of the 

qualified termination administrator, 

including the address and telephone 

number of the person signing the notice 

(or other contact person, if different 

from the person signing the notice); 

(B) The name, account number, EIN, 

and plan number of the plan with 

respect to which the person served as 

the qualified termination administrator; 

(C) A statement that the plan has been 

terminated and all the plan’s assets have 

been distributed to the plan’s 

participants and beneficiaries on the 

basis of the best available information; 

(D) A statement that plan expenses 

were paid out of plan assets by the 

qualified termination administrator in 

accordance with the requirements of 

paragraph (d)(2)(v) or (j)(3)(v) of this 

section; 

(E) If fees and expenses paid by the 

plan exceed by 20 percent or more the 

estimate required by paragraph 

(c)(3)(v)(B) or (j)(2)(v)(B) of this section, 

a statement that actual fees and 

expenses exceeded estimated fees and 

expenses and the reasons for such 

additional costs; 

(F) An identification of known 

delinquent contributions pursuant to 

paragraph (d)(2)(iii) of this section (if 

not already reported under paragraph 


emcdonald on DSK67QTVN1PROD with 
74084 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 

(c)(3)(iv)(D) or (j)(2)(iv)(D) of this 

section); 

(G) For each distribution in 

accordance with § 2550.404a–3(d)(1)(v) 

(relating to distributions on behalf of 

deceased participants and beneficiaries), 

an identification of the deceased 

participant and, if applicable, the 

deceased named beneficiary, and the 

basis behind the finding required by 

§ 2550.404a–3(d)(1)(v); and 

(H) A statement that the information 

being provided in the notice is true and 

complete based on the knowledge of the 

qualified termination administrator, and 

that the information is being provided 

by the qualified termination 

administrator under penalty of perjury. 

(3) The terms of the plan shall, for 

purposes of title I of ERISA, be deemed 

amended to the extent necessary to 

allow the qualified termination 

administrator to wind up the plan in 

accordance with this section. 

(e) Limited liability. (1)(i) Except as 

otherwise provided in paragraph 

(e)(1)(ii) and (iii) of this section, to the 

extent that the activities enumerated in 

paragraphs (d)(2) and (j)(3) of this 

section involve the exercise of 

discretionary authority or control that 

would make the qualified termination 

administrator a fiduciary within the 

meaning of section 3(21) of the Act, the 

qualified termination administrator 

shall be deemed to satisfy its 

responsibilities under section 404(a) of 

the Act with respect to such activities, 

provided that the qualified termination 

administrator complies with the 

requirements of paragraph (d)(2) and 

(j)(3) of this section as applicable. 

(ii) A qualified termination 

administrator shall be responsible for 

the selection and monitoring of any 

service provider (other than monitoring 

a provider selected pursuant to 

paragraph (d)(2)(vii)(B) of this section) 

determined by the qualified termination 

administrator to be necessary to the 

winding up of the affairs of the plan, as 

well as ensuring the reasonableness of 

the compensation paid for such 

services. If a qualified termination 

administrator selects and monitors a 

service provider in accordance with the 

requirements of section 404(a)(1) of the 

Act, the qualified termination 

administrator shall not be liable for the 

acts or omissions of the service provider 

with respect to which the qualified 

termination administrator does not have 

knowledge. 

(iii) For purposes of a distribution 

pursuant to paragraph (d)(2)(vii)(B)(2) of 

this section, a qualified termination 

administrator shall be responsible for 

the selection of an annuity provider in 

accordance with section 404 of the Act. 

(2) Nothing herein shall be construed 

to impose an obligation on the qualified 

termination administrator 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 

qualified termination administrator for 

such plan. 

(3) If assets of an abandoned plan are 

held by a person other than the 

qualified termination administrator, 

such person shall not be treated as in 

violation of section 404(a) of the Act 

solely on the basis that the person 

cooperated with and followed the 

directions of the qualified termination 

administrator in carrying out its 

responsibilities under this section with 

respect to such plan, provided that, in 

advance of any transfer or disposition of 

any assets at the direction of the 

qualified termination administrator, 

such person confirms with the 

Department of Labor that the person 

representing to be the qualified 

termination administrator with respect 

to the plan is the qualified termination 

administrator recognized by the 

Department of Labor. 

(f) Continued liability. Nothing in this 

section shall serve to relieve or limit the 

liability of any person other than the 

qualified termination administrator due 

to a violation of ERISA. 

(g) Qualified termination 

administrator. A termination 

administrator is qualified under this 

section only if: 

(1) It is eligible to serve as a trustee 

or issuer of an individual retirement 

plan, within the meaning of section 

7701(a)(37) of the Internal Revenue 

Code, and 

(2) It holds assets of the plan that is 

found abandoned pursuant to paragraph 

(b) of this section. 

(h) Affiliate. (1) The term affiliate 

means any person directly or indirectly 

controlling, controlled by, or under 

common control with, the person; or 

any officer, director, partner or 

employee of the person. 

(2) For purposes of paragraph (h)(1) of 

this section, the term control means the 

power to exercise a controlling 

influence over the management or 

policies of a person other than an 

individual. 

(i) Model notices. Appendices to this 

section contain model notices that are 

intended to assist qualified termination 

administrators in discharging the 

notification requirements under this 

section. Their use is not mandatory. 

However, the use of appropriately 

completed model notices will be 

deemed to satisfy the requirements of 

paragraphs (b)(5), (c)(3), (d)(2)(vi), 

(d)(2)(ix), and (j)(2) of this section. 

(j) Special rules for chapter 7 plans. 

(1) Notwithstanding paragraphs (b) and 

(g) of this section (relating to findings of 

abandonment and defining the term 

‘‘qualified termination administrator,’’ 

respectively), if the sponsor of an 

individual account plan is in 

liquidation under chapter 7 of title 11 of 

the United States Code: 

(i) The plan (‘‘chapter 7 plan’’) shall 

for purposes of this section be 

considered abandoned upon the entry of 

an order for relief. However, the plan 

shall cease to be considered abandoned 

pursuant to this paragraph (j)(1) if at any 

time before the plan is deemed 

terminated pursuant to paragraph (c) of 

this section, the plan sponsor’s chapter 

7 liquidation proceeding is dismissed or 

converted to a proceeding under chapter 

11 of title 11 of the United States Code. 

(ii) The bankruptcy trustee, or an 

eligible designee, may be the qualified 

termination administrator. An ‘‘eligible 

designee’’ is any person or entity 

designated by the bankruptcy trustee 

that is eligible to serve as a trustee or 

issuer of an individual retirement plan, 

within the meaning of section 

7701(a)(37) of the Internal Revenue 

Code, and that holds assets of the 

chapter 7 plan. The bankruptcy trustee 

shall be responsible for the selection 

and monitoring of any eligible designee 

in accordance with section 404(a)(1) of 

the Act. 

(2) Notice of Plan Abandonment. In 

accordance with paragraph (c) of this 

section, the qualified termination 

administrator under this paragraph (j) 

shall furnish to the U.S. Department of 

Labor a notice of plan abandonment that 

is signed and dated by the qualified 

termination administrator and that 

includes the following information: 

(i) Qualified termination 

administrator information. The name, 

address (including email address), and 

telephone number of the bankruptcy 

trustee and, if applicable, the name, 

EIN, address (including email address), 

and telephone number of any eligible 

designee acting as the qualified 

termination administrator pursuant to 

paragraph (j)(1)(ii) of this section; 

(ii) Plan information. (A) The name, 

address, telephone number, account 

number, EIN, and plan number of the 

plan with respect to which the person 

is serving as the qualified termination 

administrator, 

(B) The name and last known address 

and telephone number of the plan 

sponsor, and 

(C) The estimated number of 

participants and beneficiaries with 

accounts in the plan; 


emcdonald on DSK67QTVN1PROD with 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74085 

(iii) Chapter 7 information. A 

statement that, pursuant to paragraph 

(j)(1) of this section, the plan is 

considered to be abandoned due to an 

entry of an order for relief under chapter 

7 of the U.S. Bankruptcy Code, and a 

copy of the notice or order entered in 

the case reflecting the bankruptcy 

trustee’s appointment to administer the 

plan sponsor’s case; 

(iv) Plan asset information. (A) The 

estimated value of the plan’s assets as of 

the date of the entry of an order for 

relief, 

(B) The name, EIN, address (including 

email address) and telephone number of 

the entity that is holding these assets, 

and the length of time plan assets have 

been held by such entity, if the period 

of time is less than 12 months, 

(C) An identification of any assets 

with respect to which there is no readily 

ascertainable fair market value, as well 

as information, if any, concerning the 

value of such assets, and 

(D) An identification of known 

delinquent contributions pursuant to 

paragraph (d)(2)(iii) of this section; 

(v) Service provider information. (A) 

The name, address, and telephone 

number of known service providers 

(e.g., record keeper, accountant, lawyer, 

other asset custodian(s)) to the plan, and 

(B) An identification of any services 

considered necessary to carry out the 

qualified termination administrator’s 

authority and responsibility under this 

section, the name of the service 

provider(s) that is expected to provide 

such services, and an itemized estimate 

of expenses attendant thereto expected 

to be paid out of plan assets by the 

qualified termination administrator; and 

(vi) Perjury statement. A statement 

that the information being provided in 

the notice is true and complete based on 

the knowledge of the person electing to 

be the qualified termination 

administrator, and that the information 

is being provided by the qualified 

termination administrator under penalty 

of perjury. 

(3) Winding up the affairs of the plan. 

The qualified termination administrator 

shall comply with paragraph (d) of this 

section except as follows: 

(i) Delinquent contributions. The 

qualified termination administrator of a 

plan described in paragraph (j)(1)(i) of 

this section shall, consistent with the 

duties of a fiduciary under section 

404(a)(1) of ERISA, take reasonable and 

good faith steps to collect known 

delinquent contributions on behalf of 

the plan, taking into account the value 

of the plan assets involved, the 

likelihood of a successful recovery, and 

the expenses expected to be incurred in 

connection with collection. If the 

bankruptcy trustee designates an 

eligible designee as defined in 

paragraph (j)(1)(ii) of this section, the 

bankruptcy trustee shall at the time of 

such designation notify the eligible 

designee of any known delinquent 

contributions. 

(ii) Report fiduciary breaches. The 

qualified termination administrator of a 

plan described in paragraph (j)(1)(i) of 

this section shall report known 

delinquent contributions (employer and 

employee) owed to the plan, and any 

activity that the qualified termination 

administrator believes may be evidence 

of other fiduciary breaches that involve 

plan assets by a prior plan fiduciary. 

This information must be reported to 

the Employee Benefits Security 

Administration in conjunction with the 

filing of the notification required in 

paragraph (j)(2) or (d)(2)(ix) of this 

section. If a bankruptcy trustee 

designates an eligible designee as 

defined in paragraph (j)(1)(ii) of this 

section, the bankruptcy trustee shall 

provide the eligible designee with 

records under the control of the 

bankruptcy trustee to enable the eligible 

designee to carry out its responsibilities 

under paragraph (j)(3)(ii) of this section. 

If, after the eligible designee completes 

the winding up of the plan, the 

bankruptcy trustee, in administering the 

debtor’s estate, discovers additional 

information not already reported in the 

notification required in paragraphs (j)(2) 

or (d)(2)(ix) of this section that it 

believes may be evidence of fiduciary 

breaches that involve plan assets by a 

prior plan fiduciary, the bankruptcy 

trustee shall report such activity to the 

Employee Benefits Security 

Administration in a time and manner 

specified in instructions developed by 

the Office of Enforcement, Employee 

Benefits Security Administration, U.S. 

Department of Labor. 

(iii) Participant notification. In lieu of 

the statement required by paragraph 

(d)(2)(vi)(A)(2) of this section, the notice 

shall include a statement that the plan 

sponsor is in liquidation under chapter 

7 of title 11 of the United States Code 

and, therefore, the plan has been 

terminated by the bankruptcy trustee (or 

its eligible designee). 

(iv) Final notice. In lieu of the content 

requirements in paragraph (d)(2)(ix)(A) 

of this section (relating to the qualified 

termination administrator), the final 

notice shall include, the name, address 

(including email address), and 

telephone number of the bankruptcy 

trustee and, if applicable, the name, 

EIN, address (including email address), 

and telephone number of the eligible 

designee. 

(v) Distributions. Paragraph 

(d)(2)(vii)(C) of this section (relating to 

the ability of a qualified termination 

administrator to designate itself as the 

transferee of distribution proceeds in 

accordance with § 2550.404a–3) is not 

applicable in the case of a qualified 

termination administrator that is the 

plan sponsor’s bankruptcy trustee. 

(vi) Pay reasonable expenses. (A) If 

the bankruptcy trustee is the qualified 

termination administrator, in lieu of the 

requirements in paragraph 

(d)(2)(v)(B)(2) of this section, expenses 

shall be consistent with industry rates 

for such or similar services ordinarily 

charged by qualified termination 

administrators defined in paragraph (g) 

of this section. 

(B) If the bankruptcy trustee 

designates an eligible designee, as 

defined in paragraph (j)(1)(ii) of this 

section, to serve as the qualified 

termination administrator, the 

requirements in paragraph (d)(2)(v) of 

this section (as opposed to the 

requirements in paragraph (j)(3)(vi)(A) 

of this section) apply to expenses that 

the eligible designee pays to itself or 

others. 

(C) The eligible designee may pay, 

from plan assets, the bankruptcy trustee 

for reasonable expenses incurred in 

selecting and monitoring the eligible 

designee. 

(4) The bankruptcy trustee or eligible 

designee shall not, through waiver or 

otherwise, seek a release from liability 

under ERISA, or assert a defense of 

derived judicial immunity (or similar 

defense) in any action brought against 

the bankruptcy trustee or eligible 

designee arising out of its conduct 

under this regulation. 

BILLING CODE 4510–29–P 


emcdonald on DSK67QTVN1PROD with 
74086 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.001</GPH>

APPENDIX A TO § 2578.1 

NOTICE OF INTENT TO TERMINATE PLAN 

[Date of notice] 

[Name of plan sponsor] 

[Last known address of plan sponsor] 

Re: [Name of plan and account number or other identifYing information] 

Dear [Name of plan sponsor]: 

We are writing to advise you of our concern about the status of the subject plan. Our intention is 

to terminate the plan and distribute benefits in accordance with federal law if you do not contact 

us within 30 days of your receipt of this notice. See 29 CFR 2578.1. 

Our basis for taking this action is that our records reflect that there have been no contributions to, 

or distributions from, the plan within the past 12 months. (If the basis for sending this notice is 

under § 29 CFR 2578.1(b)(1)(i)(B), complete and include the sentence below rather than the 

sentence above.} Our basis for taking this action is (provide a description of the facts and 

circumstances indicating plan abandonment). 

We are sending this notice to you because our records show that you are the sponsor of the 

subject plan. The U.S. Department of Labor requires that you be informed that, as a fiduciary or 

plan administrator or both, you may be personally liable for all costs, civil penalties, excise 

taxes, etc. as a result of your acts or omissions with respect to this plan. The termination of this 

plan by us will not relieve you of your liability for any such costs, penalties, taxes, etc. Federal 

law also requires us to notify the U.S. Department of Labor, Employee Benefits Security 

Administration, of the termination of any abandoned plan. For information about the federal law 

governing the termination of abandoned plans, you may contact the U.S. Department of Labor at 

1.866.444.EBSA (3272). 

Please contact [name, address, and telephone number of the person, office, or department that 

the sponsor must contact regarding the plan] within 30 days in order to prevent this action. 

Sincerely, 

[Name and address of qual(fied termination administrator or appropriate designee] 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74087 


emcdonald on DSK67QTVN1PROD with EP12DE12.002</GPH>

APPENDIX B To § 2578.1 

PLANS FOUND ABANDONED PURSUANT TO 29 CFR 2578.1 (b) 

NOTIFICATION OF PLAN ABANDONMENT AND INTENT TO SERVE AS 

QUALIFIED TERMINATION ADMINISTRATOR 

[Date of not ice] 

Abandoned Plan Coordinator, Office of Enforcement 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW, Suite 600 

Washington, DC, 20210 

Re: Plan Identification 

[Plan name and plan number] 

[EINJ 

[Plan account number] 

[Address] 

[Telephone number] 

Abandoned Plan Coordinator: 

Qualified Termination Administrator 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

[EINJ 

Pursuant to 29 CFR 2578.1 (b), we have determined that the subject plan is or may become 

abandoned by its sponsor. We are eligible to serve as a Qualified Termination Administrator for 

purposes of terminating and winding up the plan in accordance with 29 CFR 2578.1, and hereby 

elect to do so. 

We find that {check the appropriate box below and provide additional information as 

necessary} : 

CJ There have been no contributions to, or distributions from, the plan for a period of at least 

12 consecutive months immediately preceding the date of this letter. Our records indicate 

that the date of the last contribution or distribution was {enter appropriate date}. 

CJ The following facts and circumstances suggest that the plan is or may become abandoned 

by the plan sponsor {add description below}: 
74088 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.003</GPH>

We have also determined that the plan sponsor {check appropriate box below}: 

CJ 

CJ 

CJ 

No longer exists 

Cannot be located 

Is unable to maintain the plan 

We have taken the following steps to locate or communicate with the known plan sponsor and 

have received no objection {provide an explanation below}: 

Part I - Plan Information 

1. Estimated number of individuals (participants and beneficiaries) with accounts 

under the plan: [number] 

2. Plan assets held by Qualified Termination Administrator: 

A. Estimated value of assets: [value] 

B. Months we have held plan assets, ifless than 12: [number] 

C. Hard to value assets {select 'yes" or "no" to identify any assets with no 

readily ascertainable fair market value, and include for those identified 

assets the best known estimate of their value}: 

Yes No 

(a) Partnership/joint venture interests [value] 

(b) Employer real property ~, 

I [value] 

(c) Real estate (other than (b)) :J [value] 

(d) Employer securities [value] 

(e) Participant loans J [value] 

(f) Loans (other than (e)) [value] 

(g) Tangible personal property I 

,_ J [value] 

3. Name and last known address and telephone number of plan sponsor: 

4. Other: 

Part II - Known Service Providers of the Plan 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74089 


emcdonald on DSK67QTVN1PROD with EP12DE12.004</GPH>

Name Address Telephone 

1. __________________________________________________________ __ 2. ________________________________________________________ __ 

3. ------------------------------------------------------------

Part III - Services and Related Expenses to be Paid 

Services Service Provider Estimated Cost 

1. __________________________________________________________ __ 

2. ________________________________________________________ __ 

3. ------------------------------------------------------------

Part IV Contact Person {enter information only if differentfrom signatory}: 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

Under penalties of perjury, I declare that I have examined this notice and to the best of my 

knowledge and belief, it is true, correct and complete. 

[Signature] 

[Title of person signing on behalf the Qualified Termination Administrator] 

[Address, e-mail address, and telephone number] 
74090 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.005</GPH>

APPENDIX C To § 2578.1 

PLANS FOUND ABANDONED PURSUANT TO 29 CFR 2578.10) 

NOTIFICATION OF PLAN ABANDONMENT AND INTENT TO SERVE AS 

QUALIFIED TERMINATION ADMINISTRATOR 

[Date o.fnotice] 

Abandoned Plan Coordinator, Office of Enforcement 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW, Suite 600 

Washington, DC, 20210 

Re: Plan Identification 

[Plan name and plan number] 

[EIN] 

[Plan account number] 

[Address] 

[Telephone number] 

Qualified Termination Administrator 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

[EIN] 

{If applicable, include and complete the following pursuant to 29 CFR 2578.1 (j) (2) (i) unless the 

same as Qualified Termination Administrator information above}: 

Bankruptcy Trustee 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

Abandoned Plan Coordinator: 

Pursuant to 29 CFR 2578.10)(1), the subject plan is considered abandoned because the sponsor 

of the plan is in liquidation pursuant to a chapter 7 bankruptcy proceeding. 

{Insert as applicable: [I have been appointed to administer the plan sponsor's case under chapter 

7 of the U.S. Bankruptcy Code, and attached is a copy ofthe notice or order entered in the case 

reflecting my appointment. As the bankruptcy trustee administering this case, I am eligible to 

serve as Qualified Termination Administrator for purposes of terminating and winding up the 

plan in accordance with 29 CFR 2578.1, and hereby elect to do so.] 

or 

[A bankruptcy trustee has been appointed to administer the plan sponsor's case under chapter 7 

of the U.S. Bankruptcy Code, and attached is a copy of the notice or order entered in the case 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74091 


emcdonald on DSK67QTVN1PROD with EP12DE12.006</GPH>

reflecting the trustee's appointment. We have been designated by the bankruptcy trustee and are 

eligible to serve as Qualified Termination Administrator for purposes of terminating and winding 

up the plan in accordance with 29 CFR 2578.1, and hereby elect to do so.]} 

Part I - Plan Information 

1. Estimated number of individuals (participants and beneficiaries) with accounts 

under the plan: [number] 

2. Name, EIN, address and email address of the entity holding plan assets (if the entity is 

not the QTA): 

A. Estimated value of plan assets as ofthe date of the entry of an order for 

relief under chapter 7 of the U.S. Bankruptcy Code: [value] 

B. Months entity has held plan assets, ifless than 12: [number] 

C. Hard to value assets {select 'yes" or "no" to identifY any assets with no 

readily ascertainable fair market value, and include for those identified 

assets the best known estimate of their value},' 

Yes No 

(a) Partnership/joint venture interests [value] 

(b) Employer real property ~ [value] 

(c) Real estate (other than (b)) [value] 

(d) Employer securities I [value] 

(e) Participant loans [value] 

(f) Loans (other than (e)) [value] 

(g) Tangible personal property [value] 

3. Name and last known address and telephone number of plan sponsor: 

4. Other: 

Part II - Known Service Providers of the Plan 

Name Address Telephone 

1. __________________________________________________________ __ 

2. ________________________________________________________ __ 

3. 
74092 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.007</GPH>

Part III Services and Related Expenses to be Paid 

Services Service Provider Estimated Cost 

1. ________________________________________________________ __ 

2. ------------------------------------------------------------

3. __________________________________________________________ __ 

Part IV - Contact Person {enter information only ifdifJerent from signatory}: 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

Under penalties of perjury, I declare that I have examined this notice and to the best of my 

knowledge and belief, it is true, correct and complete. 

[Signature] 

[Title of person signing on behalf the Qualified Termination Administrator] 

[Address, e-mail address, and telephone number] 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74093 


emcdonald on DSK67QTVN1PROD with EP12DE12.008</GPH>

[Date of notice] 

APPENDIX D TO § 2578.1 

NOTICE OF PLAN TERMINATION 

[Name and last known address o.fplan participant or ben~ficiary] 

Re: [Name o.fplan] 

Dear [Name o.fplan participant or beneficiary]: 

{Insert as applicable [We are] or [I am]} writing to inform you that the [name of plan] (Plan) has 

been terminated pursuant to regulations issued by the U.S. Department of Labor. The Plan was 

terminated because it was abandoned by [name o.f the plan sponsor]. {For plans abandoned 

pursuant to 29 CFR 2578.10)(1), replace the sentence immediately preceding with the sentence 

immediately following}: The Plan was terminated because [name of the plan sponsor] is in 

bankruptcy and the business is shutting down. 

We have determined that you have an interest in the Plan, either as a plan participant or 

beneficiary. Your account balance on [date] is/was [account balance]. We will be distributing 

this money as permitted under the terms of the Plan and federal regulations. The actual amount 

of your distribution may be more or less than the amount stated in this letter depending on 

investment gains or losses and the administrative cost of terminating the Plan and distributing 

your benefits. 

Your distribution options under the Plan are {add a description o.f the Plan's distribution 

options}. It is very important that you elect one of these forms of distribution and inform us of 

your election. The process for informing us of this election is {enter a description of the election 

process established by the qualified termination administrator}. 

{Select the next paragraph from options 1 through 3, as appropriate.} 

{Option 1: ff this notice is for a participant or beneficiary, complete and include the following 

paragraph provided the account balance does not meet the conditions o.f§2550.404a-3(d)(1)(iii) 

or (iv).} 

If you do not make an election within 30 days from your receipt of this notice, your account 

balance will be transferred directly to an individual retirement plan (inherited individual 

retirement plan in the case of a nonspouse beneficiary) maintained by {insert the name, address, 

and phone number of the provider (f known, otherwise insert the following language [a bank or 

insurance company or other similar financial institution]). Pursuant to federal law, your money 

in the individual retirement plan would then be invested in an investment product designed to 

preserve principal and provide a reasonable rate of return and liquidity. Uffee information is 

known, include the following sentence: Should your money be transferred into an individual 

retirement plan, [name of the financial institution] charges the following fees for its services: 
74094 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.009</GPH>

{add a statement offees, if any, that will be paidfrom the participant or beneficiary's individual 

retirement plan}. } 

{Option 2: J.f this notice is for a participant or beneficiary whose account balance meets the 

conditions of§2550.404a-3(d)(1)(iii) or (iv), complete and include thefollowingparagraph.} 

If you do not make an election within 30 days from your receipt of this notice, and your account 

balance is $1,000 or less, federal law permits us to transfer your balance to an interest-bearing 

federally insured bank account, to the unclaimed property fund of the State of your last known 

address, or to an individual retirement plan (inherited individual retirement plan in the case of a 

nonspouse beneficiary). Pursuant to federal law, your money, if transferred to an individual 

retirement plan would then be invested in an investment product designed to preserve principal 

and provide a reasonable rate of return and liquidity. {If known, include the name, address, and 

telephone number of the financial institution or State fund into which the individual's account 

balance will be transferred or deposited. J.f the individual's account balance is to be transferred 

to a financial institution and fee information is known, include the following sentence: Should 

your money be transferred into a plan or account, [name of the financial institution] charges the 

following fees for its services: {add a statement of fees, if any, that will be paid from the 

individual's account}. } 

{Option 3: J.f this notice is for a participant or participant's spouse whose distribution is subject 

to the survivor annuity requirements in sections 401 (a)(ll) and 417 of the Internal Revenue 

Code (or section 205 of ERISA), complete and include the following paragraph.} 

If you do not make an election within 30 days from your receipt of this notice, your account 

balance will be distributed in the form of a qualified joint and survivor annuity or qualified 

preretirement annuity as required by the Internal Revenue Code. {J.f the name of the annuity 

provider is known, include the following sentence: The name of the annuity provider is [name, 

address and phone number of the provider]. } 

For more information about the termination, your account balance, or distribution options, please 

contact [name, address, and telephone number of the qualified termination administrator and, if' 

different, the name, address, and telephone number of the appropriate contact person]. 

Sincerely, 

[Name of qualified termination administrator or appropriate designee] 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74095 


emcdonald on DSK67QTVN1PROD with EP12DE12.010</GPH>

APPENDIX E To § 2578.1 

FINAL NOTICE 

[Date of notice] 

Abandoned Plan Coordinator, Office of Enforcement 

Employee Benefits Security Administration 

U.S. Department of Labor 

200 Constitution Ave., NW, Suite 600 

Washington, DC, 20210 

Re: Plan Identification 

[Plan name and plan number] 

[Plan account number] 

[EIN] 

Qualified Termination Administrator 

[Name] 

[Address and e-mail address] 

[Telephone number] 

[EIN] 

U.rapplicable, complete and include thefollowingpursuant to 29 CFR 2578.10)(3)(iv) 

unless the same as Qual~fied Termination Administrator information above}: 

Bankruptcy Trustee 

[Name] 

[Address] 

[E-mail address] 

[Telephone number] 

Abandoned Plan Coordinator: 

General Information 

The termination and winding-up process of the subject plan has been completed pursuant 

to 29 CFR 2578.1. Benefits were distributed to participants and beneficiaries on the basis 

of the best available information pursuant to 29 CFR 2578.1 (d)(2)(i). Plan expenses were 

paid out of plan assets pursuant to 29 CFR 2578. 1 (d)(2)(v) or 29 CFR 2578.1G)(3)(vi). 

{Include and complete the next section, entitled "Contact Person, " only if the contact 

person is different from the signatory of this notice. } 

Contact Person 

[Name] 

[Address and e-mail address] 

[Telephone number] 
74096 Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 


emcdonald on DSK67QTVN1PROD with EP12DE12.011</GPH>

{Include and complete the next section, entitled "Expenses Paid" only if fees and 

expenses paid by the plan exceeded by 20 percent or more the estimate required by 29 

CFR 2578.1 (c)(3)(v)(B) or 29 CFR 2578.1 O)(2)(v)(B).} 

Expenses Paid 

The actual fees and/or expenses paid in connection with winding up the Plan exceeded by 

{insert either: [20 percent or more] or [enter the actual percentage]} the estimate 

required by 29 CFR 2578.1(c)(3)(v)(B) or 29 CFR 2578.1G)(2)(v)(B). The reason or 

reasons for such additional costs are {provide an explanation of the additional costs}. 

Other 

Under penalties of perjury, I declare that I have examined this notice and to the best of 

my knowledge and belief, it is true, correct and complete. 

[Signature] 

[Title of person signing on behalf the Qualified Termination Administrator] 

[Address, e-mail address, and telephone number] 

Attachment 
Federal Register / Vol. 77, No. 239 / Wednesday, December 12, 2012 / Proposed Rules 74097 

Signed at Washington, DC, this 3rd day of 

December, 2012. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

[FR Doc. 2012–29500 Filed 12–11–12; 8:45 am] 

BILLING CODE 4510–29–C 


emcdonald on DSK67QTVN1PROD with