New Department of Labor Regs Coming Our Way – Part II
The U.S. Department of Labor (DOL) has several important initiatives on its regulatory agenda for 2015/2016 that will affect various qualified retirement plan providers in different yet significant ways.
Some of these have just begun moving through the Proposed Rule stage, while others are in the Final Rule stage. In the first of our two-part series, we provided an overview of several regs currently in the Proposed Rule state. In this one, we’ll look three new regulations in the Final Rule Stage.
Amendment of Abandoned Plan Program
In April 2006, the DOL published a package of regulations, collectively titled Termination of Abandoned Individual Account Plans. These facilitate the termination of, and distribution of benefits from, individual account pension plans that have been abandoned by their sponsoring employers. (See Vol. 71, No. 77 FR 20820.) The new rulemaking will examine whether, and how, to amend those regulations by expanding the scope of individuals entitled to be a “qualified termination administrator” (QTA).
Under the Termination of Abandoned Individual Account Plans regulations, only a QTA is authorized to determine whether an individual account plan is abandoned, and to carry out related activities necessary to the termination and winding up of the plan’s affairs. Current regulations also stipulate that qualification to serve as a QTA is limited to the regulated financial institution community – banks, trust companies, insurance companies and mutual fund companies. The primary change in the proposed regulation would allow Chapter 7 bankruptcy trustees to serve as QTAs in order to terminate and wind up the plans of sponsors in a Chapter 7 bankruptcy. It would also allow other technical changes consistent with this primary change.
However, this change in the regulation doesn’t automatically make Chapter 7 bankruptcy trustees proficient in the termination and winding up of abandoned plans. Regardless, as a provider of Abandoned Plan/QTA services for large financial institutions in the qualified plan space, we see this change as a good idea. There are many technicalities to winding up an abandoned plan, and having a specialist perform this work can reduce risk and ensure abandoned plans are properly terminated.
Electronic Filing of Apprenticeship & Training Notices, and Top Hat Plan Statements
Regulation 29 CFR §2520.104-22 contains an exemption from the reporting and disclosure requirements for apprenticeship and training plans. Regulation 29 CFR sec 2520.104-23 contains an alternative method of compliance with the reporting and disclosure requirements for pension plans for certain selected employees. Both regulations contain a manual filing obligation. This rulemaking would amend those regulations to substitute electronic filing for regular mail or hand delivery.
Amended and Restated Voluntary Fiduciary Correction Program
The Employee Benefits Security Administration (EBSA) is amending and restating its Voluntary Fiduciary Correction Program (VFCP) under ERISA, which originally was adopted in 2002 and revised in 2005 and 2006. The VFCP is designed to encourage the voluntary correction of fiduciary violations by permitting persons to avoid potential civil actions and civil penalties if they take steps to correct identified violations in a manner consistent with the VFCP.
The amendments will expand the scope of some transactions currently eligible for correction and streamline correction procedures for certain others. EBSA will issue a restatement of the VFCP in its entirety and request public comments. PenChecks Trust has long supported the need for improved fiduciary responsibility, and believes that encouraging voluntary correction will better serve plan participants and the industry.