[Federal Register Volume 77, Number 239 (Wednesday, December 12, 2012)]
[Proposed Rules]
[Pages 74063-74097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29500]



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

[[Page 74063]]


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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.

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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: [email protected]. 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

[[Page 74064]]

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\
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    \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.
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    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\
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    \3\ See 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'').
    \4\ Section 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.
    \5\ For 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.
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    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.
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    \6\ A bankruptcy trustee who undertakes these plan 
responsibilities is a fiduciary within the meaning of section 3(21) 
of ERISA.
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    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

[[Page 74065]]

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 Sec.  
2578.1 and to the other two regulations (Sec.  2550.404a-3 and Sec.  
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.
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    \7\ The 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 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.
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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 Sec.  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 Sec.  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 Sec.  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 Sec.  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\
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    \8\ On 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.
    \9\ But see note 7.
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(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 Sec.  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.
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    \10\ Any 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.
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(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 Sec.  
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 
Sec.  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

[[Page 74066]]

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 Sec.  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\
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    \11\ Under 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 Sec.  2578.1(e)(2).
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    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\
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    \12\ As 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.
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    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

[[Page 74067]]

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 Sec.  
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 winding-up 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.
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    \13\ Proposed 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 Sec.  2578.1 without the special 
modifications contained in proposed paragraph (j)(3)(v)(A) for 
bankruptcy trustees.
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    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 Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    \14\ Under Sec.  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 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 Sec.  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

[[Page 74068]]

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 Sec.  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.
---------------------------------------------------------------------------

    \15\ 71 FR 20806.
---------------------------------------------------------------------------

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 Sec.  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 Sec.  
2550.404a-3 to make clear that the special rule also is available in 
the case of chapter 7 plans.
---------------------------------------------------------------------------

    \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.
    \17\ The 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).
---------------------------------------------------------------------------

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 
Sec.  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 Sec.  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 Sec.  2578.1(c)(3)(i)(C) referenced above, the Department 
intends to remove a part of the definition of the term ``affiliate'' in 
Sec.  2578.1(h). In the Abandoned Plan

[[Page 74069]]

Regulations, the term ``affiliate'' for general purposes of Sec.  
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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  2520.103-13 to 
clarify and update the specific location of these instructions.
---------------------------------------------------------------------------

    \18\ 71 FR 20830.
---------------------------------------------------------------------------

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \19\ See 71 FR 20827 (further discussion of the Department's 
response to commenters on the three IRS conditions).
---------------------------------------------------------------------------

    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

[[Page 74070]]

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 x 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 x 1.5), and the number 
of affected participants to 2,970 (495 plans x 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

[[Page 74071]]

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.
---------------------------------------------------------------------------

    \20\ The Department invites public comments regarding the 
characteristics of chapter 7 plans that may participate in the 
Abandoned Plan 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 x $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 x 
.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 x 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

[[Page 74072]]

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, Sec.  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, Sec.  
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 Sec.  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

[[Page 74073]]

summarized in the following table discussed below.

                                               Cost Burden of Rule
----------------------------------------------------------------------------------------------------------------
                                                                     Abandoned
                                                  Bankrupt plans    plans--non      Terminating
                                                  Chapter 7 (new   Chapter 7 (in     plans (in         Total
                                                   to this RIA)    previous RIA)   previous RIA)
----------------------------------------------------------------------------------------------------------------
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 x $66.36 per hour).\22\
---------------------------------------------------------------------------

    \21\ The 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.
    \22\ Any 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.
---------------------------------------------------------------------------

    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 x .5 hours) of clerical 
staff time with an associated cost burden of $7,000 (495 plans x .5 
hours x $28.21 per hour), and 248 hours (495 plans x .5 hours) of a 
financial professional's time with an associated cost burden of $16,400 
(495 plans x .5 hours x $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 x .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 x ($6.35 + 3 pages x $.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).
---------------------------------------------------------------------------

    \23\ $26,000 = $7,000 for clerical cost time + $16,400 for 
financial professional time + $2,600 for mailing.
---------------------------------------------------------------------------

    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 x .25) on the financial 
professionals and a cost burden of $2,700 (41 hours x $66.36 per hour) 
on the financial professionals. For the clerical professionals, the 
hour burden is estimated at 14 hours (165 plans x .0833 hours) and 
associated cost burden is $400 (14 hours x $28.21 per hour).
    Material requirements are expected to be 10 pages, costing $66 in 
total ($0.50 per affected plan x .80 fraction of plans that submit 
initial notices by paper x 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

[[Page 74074]]

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 x 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 
x 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 x 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 x 6 participants). This results in approximately 248 hours 
(495 plans x 6 participants per plan x .0833 hours per participant) of 
clerical staff time with an associated cost burden of $7,000 (248 hours 
x $28.21 per hour) and 41 hours (495 plans x .0833 hours per plan) of a 
financial professional's time with an associated cost burden of 
approximately $2,700 (41 hours x $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 
x $.05 + $0.45). Of the 2,970 participants (495 plans x 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.
---------------------------------------------------------------------------

    \24\ $7,000 in clerical costs + $2,700 in financial professional 
costs + $1,000 in mailing costs.
---------------------------------------------------------------------------

    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 x .167 hours) of clerical staff time with an associated cost 
burden of $2,300 (83 hours x $28.21 per hour) and 83 hours of a 
financial professional's time (495 plans x .167 hours) with an 
associated cost burden of $5,500 (83 hours x $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) x 495 plans x .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 x (.5 financial professional hours per plan + .0833 
clerical hours per plan)) with a cost of $600 for trustees (17 plans x 
.5 financial professional hours x $66.36/hour + 17 plans x .0833 
clerical hours x $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 x $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 x .7 fraction submitting by mail x $.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 x $66.36 per hour x 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 x 6 pages per 
terminal report x $.05/page x .70 fraction of plans that

[[Page 74075]]

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 x .033 hours 
per participant x $28.21 per hour) in clerical time, and $607,000 
(39,000 plans x .167 hours per plan x $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 x ($0.45 
for postage + ($0.05 per page x 1 page) x 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.
---------------------------------------------------------------------------

    \25\ These estimates for the number of participants and sponsors 
are based on 2008 Form 5500 Data filings.
---------------------------------------------------------------------------

    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 cost-
effective 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 x 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

[[Page 74076]]

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

[[Page 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, Sec.  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 Sec.  2520.103-13 to read as follows:


Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  
2578.1(d)(2)(vii) of this chapter and a statement regarding whether any 
such distributions were transfers under Sec.  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 Sec.  
2578.1(d)(2)(i) through Sec.  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 Sec.  2578.1(d)(2)(i) 
through Sec.  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 Sec.  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 Sec.  2550.404a-3 to read as follows:


Sec.  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 Sec.  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

[[Page 74078]]

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 Sec.  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, 
Sec.  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 Sec.  
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 Sec.  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 Sec.  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.

[[Page 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 Sec.  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

[[Page 74080]]

[GRAPHIC] [TIFF OMITTED] TP12DE12.000

BILLING CODE 4510-29-C

[[Page 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 Sec.  2578.1 to read as follows:


Sec.  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 winding-up 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

[[Page 74082]]

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;

[[Page 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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 
Sec.  2550.404a-3(d)(1)(i) or (d)(1)(ii) of this chapter) or other 
account (described in Sec.  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 Sec.  2550.404a-3(d)(1)(i) or 
(d)(1)(ii) of this chapter), qualified survivor annuity, or other 
account (described in Sec.  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 Sec.  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 Sec.  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 Sec.  
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

[[Page 74084]]

(c)(3)(iv)(D) or (j)(2)(iv)(D) of this section);
    (G) For each distribution in accordance with Sec.  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 Sec.  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;

[[Page 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 Sec.  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.
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    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