A new rule proposed by the U.S. Department of Labor would make it easier for trustees of companies in Chapter 7 bankruptcy to distribute assets from its retirement plans.
The rule from the agency’s Employee Benefits Security Administration would allow bankrupt companies’ trustees to use the agency’s Abandoned Plan Program to streamline the process of distributing funds from plans, including 401(k) plans, while reducing fees for things such as annual reporting, legal compliance and other administrative services. The move is aimed at reducing the time and resources required to “wind up” a bankrupt company’s retirement plan.
The proposed regulation is meant “to help workers and retirees of bankrupt companies gain access to their retirement money sooner,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi in a statement. “Far too often, the retired workers of these companies are unable to obtain their hard-earned retirement savings in a timely way.”
Without the rule change extending the Abandoned Plan Program to Chapter 7 trustees, bankruptcy law would require the company’s trustee to administer individual account retirement plans, a move that is often time consuming, procedurally more complicated and more costly.