Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.
Often times, specific events effecting a business will result in a plan sponsor neglecting their fiduciary responsibilities to a point where the DOL would consider the retirement plan abandoned. These events have historically included bankruptcies, mergers/acquisitions..etc. The result is that the trustee is left holding the assets, without the necessary authorization needed to pay the assets out to the participants.
To remedy this situation, the DOL has developed guidelines for when a plan is considered abandoned and what remedial steps would follow. A plan is deemed abandoned if:
- No contributions to or distributions from the plan have been made for a period of at least 12 consecutive months and,
- It is determined that the plan sponsor no longer exists, cannot be located, or is unable to maintain the plan.
At this point, according to the definition, a qualified termination administrator (QTA) may determine that the plan is abandoned. A QTA is the entity holding the plan’s assets and must be eligible as a trustee or issuer of the retirement plan.
The QTA would be responsible for wrapping up the affairs of the plan, including paying out the assets, and filing a summary terminal report.
Further information regarding this program is available here.
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