Abandoned Plan Regulations, 43636-43675 [2024-09029]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 89, Number 97 (Friday, May 17, 2024)]
[Rules and Regulations]
[Pages 43636-43675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09029]



[[Page 43635]]

Vol. 89

Friday,

No. 97

May 17, 2024

Part III





Department of Labor





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Employee Benefits Security Administration





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29 CFR Parts 2520, 2550, and 2578





Abandoned Plan Regulations and Prohibited Transaction Exemption 2006-06 
for Services Provided in Connection With the Termination of Abandoned 
Individual Account Plans; Interim Final Rules

Federal Register / Vol. 89 , No. 97 / Friday, May 17, 2024 / Rules 
and Regulations

[[Page 43636]]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Parts 2520, 2550, and 2578

RIN 1210-AC04


Abandoned Plan Regulations

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Interim final rules with request for comments.

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SUMMARY: This rulemaking amends the Abandoned Plan Program regulations 
that provide streamlined procedures for the termination of, and 
distribution of benefits from, individual account pension plans that 
have been abandoned by their sponsoring employers. The regulations, 
which were adopted in 2006 under the Employee Retirement Income 
Security Act of 1974, as amended (``ERISA''), did not cover individual 
account pension plans whose sponsors are in liquidation under chapter 7 
of the U.S. Bankruptcy Code. These interim final rules expand the 
regulations to cover these plans so that bankruptcy trustees may use 
the Abandoned Plan Program's streamlined procedures to terminate and 
wind them up. Other technical amendments also are being made to improve 
the efficiency and operation of the Abandoned Plan Program. The 
amendments will affect employee benefit plans (primarily small defined 
contribution plans), participants and beneficiaries, service providers, 
and individuals appointed to serve as bankruptcy trustees under chapter 
7 of the U.S. Bankruptcy Code. The Department is also issuing an 
amendment to PTE 2006-06, the prohibited transaction exemption 
accompanying the Abandoned Plan Program regulations, elsewhere in this 
issue of the Federal Register.

DATES: 
    Effective Date. These interim final rules are effective on July 16, 
2024.
    Comment Due Date. Comments on these interim final rules are due on 
July 16, 2024.

ADDRESSES: Interested persons are encouraged to submit their comments 
on these interim final rules online. You may submit comments, 
identified by RIN 1210-AC04, by either of the following methods:
    Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    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, Attn: Amendments to the 
Abandoned Plan Program regulations interim final rules RIN 1210-AC04.
    Instructions: All submissions must include the agency name and 
Regulatory Identifier Number (RIN 1210-AC04) for this rulemaking. If 
you submit comments online, do not submit paper copies. Warning: Do not 
include any personally identifiable or confidential business 
information that you do not want publicly disclosed. Comments are 
public records that are posted online as received and can be retrieved 
by most internet search engines.
    Docket: Comments will be available to the public, without charge, 
online at the Federal eRulemaking Portal at https://www.regulations.gov, 
on the Department's website at https://www.dol.gov/agencies/ebsa, and at 
the Public Disclosure Room, Employee Benefits Security Administration, 
Room N-1513, 200 Constitution Ave., NW, Washington, DC 20210. The 
plain-language summary of the interim final rules of not more than 100 
words in length required by the Providing Accountability Through 
Transparency Act of 2023, and any other background documents, also can 
be accessed at the Federal eRulemaking Portal at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Thomas M. Hindmarch or Jason Dewitt, 
Office of Regulations and Interpretations, Employee Benefits Security 
Administration, (202) 693-8500. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. Summary Overview

    On April 21, 2006, the Department of Labor issued three regulations 
that established the Employee Benefits Security Administration's (EBSA) 
Abandoned Plan Program to facilitate the orderly and efficient 
termination of, and distribution of benefits from, individual account 
pension plans that have been abandoned by their sponsoring 
employers.\1\
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    \1\ 71 FR 20820. See also, 73 FR 58459 (Oct. 7, 2008) for 
subsequent amendments with regard to distributions on behalf of a 
missing non-spouse beneficiary.
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    The first regulation establishes standards for determining when 
individual account plans may be considered ``abandoned'' and procedures 
by which financial institutions, called ``qualified termination 
administrators'' (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 (ERISA).\2\ The second regulation provides a fiduciary 
safe harbor for QTAs 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.'' \3\ The third regulation establishes a 
simplified method for filing a terminal report for abandoned individual 
account plans.\4\
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    \2\ 29 CFR 2578.1.
    \3\ 29 CFR 2550.404a-3. This safe harbor also is available to 
fiduciaries of terminated individual account plans that are not 
abandoned.
    \4\ 29 CFR 2520.103-13.
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    The 2006 regulations were accompanied by a prohibited transaction 
exemption, PTE 2006-06, which facilitates the goal of the Abandoned 
Plan Program by permitting a QTA who meets the conditions in the 
exemption to select itself or an affiliate to carry out the termination 
and winding-up activities specified in the 2006 regulations. The 
exemption also allows a QTA to pay itself or an affiliate for those 
services.\5\
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    \5\ See PTE 2006-06, 71 FR 20855 (Apr. 21, 2006) as amended at 
73 FR 58629 (Oct. 7, 2008) (distributions on behalf of a missing 
non-spouse beneficiary).
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    For the reasons set forth in the 2006 preamble, the Abandoned Plan 
Program regulations strictly limit who may be a QTA.\6\ To be a QTA, an 
entity must:
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    \6\ 71 FR at 20821.
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    (1) 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 and
    (2) hold assets of the plan on whose behalf it will serve as the 
QTA.\7\
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    \7\ 29 CFR 2578.1(g).
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    As a result of these conditions, bankruptcy trustees ordinarily do 
not qualify as QTAs under the Abandoned Plan Program regulations. This 
means the regulations and the class exemption generally are not 
available with respect to plans whose sponsors are in liquidation under 
chapter 7 of the Bankruptcy Code. This was expressly acknowledged and 
discussed in the preamble when the Department published the Abandoned 
Plan Program regulations in 2006.\8\
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    \8\ 71 FR at 20821.
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    For several reasons, the Department decided to revisit its decision 
to preclude bankruptcy trustees from serving as QTAs. The Department 
believed and continues to believe that when an individual account plan

[[Page 43637]]

sponsor is in liquidation in a chapter 7 bankruptcy case, the plan 
should be terminated and wound up in an orderly and efficient manner. 
In bankruptcy cases, as with abandoned plans generally, the sponsor 
usually is not able to carry out this function. Instead, the Department 
expected that, in chapter 7 bankruptcy cases, the appointed bankruptcy 
trustee would take the necessary steps to terminate the plan, wind up 
its affairs, and distribute plan benefits.
    The issue of the bankruptcy trustee's authority to terminate and 
wind up the plan was addressed by the enactment of 11 U.S.C. 704(a)(11) 
as part of the Bankruptcy Abuse Prevention and Consumer Protection Act 
of 2005 (BAPCPA).\9\ Under that provision, when an entity that sponsors 
an individual account plan is liquidated under chapter 7 of the 
Bankruptcy Code, the appointed bankruptcy trustee administering the 
liquidation proceeding is required to continue to perform the plan 
administration obligations that would otherwise be required of the 
bankrupt entity.\10\
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    \9\ Public Law 109-8, 119 Stat. 23.
    \10\ Section 704(a)(11) refers to whether the debtor (or any 
entity designated by the debtor) serves as the administrator (as 
defined in ERISA section 3) of an employee benefit plan. ERISA 
section 3(16) defines the ``administrator'' as the plan sponsor in 
the absence of any designation in the plan document of another 
person as administrator.
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    Based on its experience administering the Abandoned Plan Program, 
the Department concluded that the termination of individual account 
plans of sponsors in liquidation under chapter 7 (Chapter 7 ERISA 
Plans) could be improved by including bankruptcy trustees as QTAs and 
providing streamlined termination and winding up procedures that are 
applicable to them \11\ Thus, on December 12, 2012, the Department 
published proposed amendments to the 2006 regulations.\12\ The purpose 
of the regulatory action was to advance the interests of participants 
and beneficiaries by:
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    \11\ The proposal referred to these plans as ``chapter 7 
plans.'' The new term ``Chapter 7 ERISA Plans'' is used in these 
interim final rules for avoidance of confusion regarding the term 
``plan'' used in the bankruptcy context.
    \12\ 77 FR 74063. The Department also published in the same 
issue of the Federal Register proposed amendments to class exemption 
PTE 2006-06 addressing the various transactions related to the 
proposed amendments to the regulations. 77 FR 74055.
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    (1) facilitating the orderly and efficient termination of Chapter 7 
ERISA Plans,
    (2) reducing administrative burden and costs imposed on Chapter 7 
ERISA Plans that terminate in accordance with the regulations, and
    (3) providing an avenue for bankruptcy trustees to discharge their 
duties under ERISA and the Bankruptcy Code with respect to Chapter 7 
ERISA Plans.

Other technical amendments were also proposed to improve the operation 
of the program.
    The Department received seven written comment letters on the 2012 
proposal, on behalf of bankruptcy trustees, service providers and 
financial institutions, the Federal Deposit Insurance Corporation 
(FDIC) in its receivership role, and plan participant representatives. 
The commenters generally supported the program's expansion to include 
Chapter 7 ERISA Plans and identified several areas in which they 
thought the proposal could be improved. The written comments on the 
2012 proposal are available on the Department's website.\13\
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    \13\ Available at www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB47.
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    The Department has concluded that expanding the Abandoned Plan 
Program regulations to cover Chapter 7 ERISA Plans and making other 
technical changes in response to the public comments would result in an 
improved Abandoned Plan Program. The Department acknowledges that it 
has been over 10 years since the comment period closed. However, the 
purposes of the regulatory action and the rationale for the changes 
discussed in the 2012 proposal continue to be relevant, and the 
program's expansion to include Chapter 7 ERISA Plans and adoption of 
certain other technical improvements would advance the interests of 
participants and beneficiaries in abandoned plans.
    The Department is relying on its earlier proposal, its 
consideration of comments on that proposal, and its understanding of 
the challenges facing these plans to finalize these interim final 
rules. The Department acknowledges the delay in finalizing the rules 
and therefore also believes another round of public comments would help 
it evaluate the further program expansions suggested by some 
stakeholders and other possible program improvements to address 
potential changes in marketplace circumstances and stakeholder 
experiences with abandoned plans. Accordingly, the Department is 
adopting these amendments to the Abandoned Plan Program regulations in 
the form of interim final rules with a request for comments.

B. Abandoned Plan Program Special Rules for Chapter 7 ERISA Plans--
Sec.  2578.1

    The new provisions for Chapter 7 ERISA Plans are contained in 
paragraph (j) of 29 CFR 2578.1. The amendments extend the Abandoned 
Plan Program's termination and winding up procedures to Chapter 7 ERISA 
Plans. New paragraph (j) is largely an overlay on the existing program. 
This overlay approach enabled the Department to adapt the 2006 
regulations to Chapter 7 ERISA Plans without overhauling the framework 
of the Abandoned Plan Program.
    In terminating a Chapter 7 ERISA Plan, a QTA would generally apply 
the ``winding up procedures'' in paragraph (d) of Sec.  2578.1 except 
to the extent that such procedures are modified by paragraph (j). 
Paragraph (j) provides that such plans are deemed abandoned upon the 
bankruptcy court's entry of an order for relief in the plan sponsor's 
liquidation proceeding. Paragraph (j) then allows the bankruptcy 
trustee or an ``eligible designee'' to be the QTA, terminate and wind 
up the plan using the streamlined procedures, and pay itself reasonable 
compensation from plan assets for these services. A corresponding edit 
to paragraph (e) of Sec.  2578.1 makes clear that the limited relief 
from ERISA's fiduciary liability provisions applies to a bankruptcy 
trustee that complies with paragraph (j)(7). When EBSA has determined 
that the QTA (whether bankruptcy trustee or eligible designee) has 
completed its responsibilities under the program, EBSA will provide a 
letter to the QTA entitled Receipt of Final Notice.
    Paragraph (j) allows and in some cases mandates the bankruptcy 
trustee to appoint an ``eligible designee'' to terminate and wind up 
the plan under the streamlined procedures of the Abandoned Plan 
Program. Paragraph (j) recognizes only two types of eligible designees:
     an entity that can serve as a QTA under paragraph (g) of 
Sec.  2578.1 (i.e., an entity 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 
plan on whose behalf it will serve as the QTA).
     a person who has served within the previous five years as 
a bankruptcy trustee in a case under chapter 7 of the Bankruptcy Code 
(referred to herein as the ``independent bankruptcy trustee 
practitioner'').
    If appointed, the eligible designee would serve as the plan's QTA 
and

[[Page 43638]]

would terminate and wind up the plan in accordance with these interim 
final rules. In this regard, the eligible designee's responsibilities 
in winding up the affairs of the plan would be the same as those of the 
bankruptcy trustee if it had elected to act as the QTA. While the 
United States Trustee Program maintains oversight authority of the 
bankruptcy trustee under 28 U.S.C. 586, including the performance of 
trustee duties under 11 U.S.C. 704,\14\ the Department emphasizes that 
the use of the Abandoned Plan Program and winding up procedures under 
paragraphs (d) and (j) of section 2578.1 are governed by ERISA (and 
subject to Department oversight).
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    \14\ Bankruptcy administrators oversee the administration of 
bankruptcy cases filed in Alabama and North Carolina.
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    The eligible designee is acting under the authority of ERISA and 29 
CFR 2578.1(j) and the designation under the IFR does not confer upon 
any party to the bankruptcy proceeding the ability to make a claim upon 
any bond held by the eligible designee under the Federal Rules of 
Bankruptcy Procedure.\15\ The Department views the bankruptcy trustees' 
and eligible designees' activities under the Abandoned Plan Program as 
subject to ERISA and Department oversight. This would include, for 
example, a bankruptcy trustee's designation of an independent 
bankruptcy trustee practitioner as an eligible designee, a bankruptcy 
trustee's or eligible designee's hiring of plan service providers, and 
a bankruptcy trustee's or eligible designee's decision to pay itself or 
another service provider from plan assets.\16\
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    \15\ See 11 U.S.C. 322; Federal Rule of Bankruptcy Procedure 
2010.
    \16\ See Kirschenbaum v. U.S. Dept. of Labor (In re Robert Plan 
Corp.), 777 F.3d 594 (2d Cir. 2015) (bankruptcy courts do not have 
jurisdiction to award compensation to a chapter 7 bankruptcy trustee 
and retained professionals out of assets in a 401(k) plan governed 
by ERISA).
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    While the procedures and requirements in these interim final rules 
are voluntary, in the Department's view, a bankruptcy trustee that 
follows the interim final rules should generally be able to reduce its 
administrative burden and costs.\17\ A more detailed description of the 
cost savings attributable to relieving the bankruptcy trustee from the 
obligation to file annual reports can be found in the Regulatory Impact 
Analysis section of this preamble.
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    \17\ A bankruptcy trustee that decides not to use the 
streamlined procedures of the program will not have the fiduciary 
relief provided under the program with respect to the termination 
and winding up of the plan and will have to complete and file all 
annual reports (past due or otherwise) and furnish the attendant 
summary annual reports to participants as would be required of any 
other plan administrator. The Department expects that the costs 
savings to the plan and its participants and beneficiaries will also 
be an important factor for bankruptcy trustees in deciding to use 
the program.
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1. Bankruptcy Trustee as Qualified Termination Administrator--Sec.  
2578.1(j)(3)

    These interim final rules generally adopt the provision from the 
2012 proposal that allows the bankruptcy trustee in the case to elect 
to serve as the QTA. For purposes of the interim final rules, the 
bankruptcy trustee in the case includes the interim trustee appointed 
after the order for relief is entered, as well as an elected trustee if 
applicable.\18\ The bankruptcy trustee would have to satisfy the 
winding up procedures in paragraphs (d) and (j) of Sec.  2578.1 as 
discussed herein. A bankruptcy trustee that satisfies the conditions of 
the interim final rules is entitled to reasonable compensation for its 
services and also is entitled to the fiduciary liability relief 
provided by paragraph (e) of Sec.  2578.1.
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    \18\ See 11 U.S.C. 702(b) and (d).
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    As stated above, commenters were generally supportive of the 
program's expansion to include Chapter 7 ERISA Plans. One commenter 
expressed the view that the goals of the Abandoned Plan Program could 
be furthered by reducing the role of the bankruptcy trustee as much as 
possible in favor of having another QTA (i.e., the plan's asset 
custodian eligible to serve under paragraph (g)) wind up these plans. 
The commenter stated that a chapter 7 bankruptcy trustee must always 
remain ``disinterested'', which meant that the trustee could not 
represent the interests of both the bankruptcy estate and an adverse 
party to the estate at the same time. The commenter cited several 
specific concerns with a bankruptcy trustee having ongoing 
responsibilities to an ERISA plan until its termination. The concerns 
included the trustee's lack of expertise in monitoring ERISA plan 
termination; perceived conflicts between a trustee's role with respect 
to the bankruptcy estate and as QTA for the terminating ERISA plan; and 
interaction between the requirements of the proposal and the 
established practices of seeking bankruptcy court approval for any 
``out-of-the-ordinary-course-activity'' in administering the bankruptcy 
estate. The commenter also expressed concern that an ongoing role for 
the bankruptcy trustee could conflict with its obligation to close the 
estate expeditiously. For these reasons, the commenter believed that a 
chapter 7 bankruptcy trustee's responsibilities should be discharged by 
the appointment of an asset custodian eligible designee as QTA and the 
provision of information in the trustee's possession to the QTA.
    The Department has carefully considered this comment and has made 
some changes in these interim final rules, as discussed below, 
including requiring that the bankruptcy trustee appoint an eligible 
designee to be the QTA in certain circumstances. In considering the 
potential breadth of the changes, the Department was mindful of the 
fact that, in BAPCPA, Congress assigned the obligations of an ERISA 
plan administrator to chapter 7 bankruptcy trustees. Therefore, it does 
not appear that Congress saw a fundamental conflict between a trustee's 
role with respect to the bankruptcy estate and its role in terminating 
the ERISA plan. As a result of this statutory assignment of 
responsibility, the Department does not believe it is appropriate to 
adopt a framework in which the chapter 7 bankruptcy trustee would have 
no ongoing obligation to the plan after appointment of an eligible 
designee.\19\
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    \19\ One commenter argued that Sec.  704(a)(11) does not make 
the chapter 7 bankruptcy trustee the plan administrator but rather 
requires it to ``perform the obligation required of the 
administrator[.]'' In this circumstance, the Department does not 
believe there is a meaningful distinction between the two. The 
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 
Report of the Committee on the Judiciary House of Representatives, 
to accompany S. 256, states at p. 19: ``[T]he bill streamlines the 
appointment of an ERISA administrator for an employee benefit plan, 
under certain circumstances, to minimize the disruption that results 
when an employer files for bankruptcy relief.'' The report states at 
page 96: ``Subsection (a) of section 446 of the Act amends 
Bankruptcy Code section 521(a) to require a debtor, unless a trustee 
is serving in the case, to serve as the administrator (as defined in 
the Employee Retirement Income Security Act of 1974) of an employee 
benefit plan if the debtor served in such capacity at the time the 
case was filed. Section 446(b) amends Bankruptcy Code section 704 to 
require the chapter 7 trustee to perform the obligations of such 
administrator in a case where the debtor or an entity designated by 
the debtor was required to perform such obligations. Section 446(c) 
amends Bankruptcy Code section 1106(a) to require a chapter 11 
trustee to perform these obligations.'' Report is available at 
www.congress.gov/congressional-report/109th-congress/house-report/31/1.
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2. Appointing an Eligible Designee as QTA--Sec.  2578.1 (j)(4) and 
(j)(5)

    The 2012 proposal featured a provision that allowed bankruptcy 
trustees to appoint eligible designees to wind up Chapter 7 ERISA 
Plans, rather than the bankruptcy trustee serving as the QTA. Although, 
as discussed in the following preamble sections, public comments 
disagreed on the proper scope and effect of such an appointment, 
commenters focusing on the appointment provision generally

[[Page 43639]]

supported the idea. Accordingly, these interim final rules adopt the 
appointment feature with certain modifications.
(a) Who may be an eligible designee?
    These interim final rules change the 2012 proposal's limits on who 
may be an eligible designee. An eligible designee is an important 
position under the interim final rules because, after accepting its 
appointment, the eligible designee serves as the QTA and is responsible 
for terminating and winding up the plan in accordance with the interim 
final regulations.
    Under the proposal, an ``eligible designee'' was strictly limited 
to 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 ERISA Plan. Thus, an 
eligible designee could be the plan's asset custodian at the time of 
abandonment, or another entity chosen by the bankruptcy trustee.
    Under these interim final rules, the bankruptcy trustee may appoint 
either a plan asset custodian described above or an independent 
bankruptcy trustee practitioner to be the eligible designee. An 
independent bankruptcy trustee practitioner is not the trustee for that 
particular chapter 7 case, but has served within the previous five 
years as a bankruptcy trustee in a case under chapter 7 of the 
Bankruptcy Code. The person could have served as a bankruptcy trustee 
in a case under chapter 7 pursuant to an appointment by the United 
States Trustee (or a bankruptcy administrator, if applicable) to a 
panel for chapter 7 liquidations, pursuant to an election, or by 
another reason such as being the bankruptcy trustee in a chapter 11 
case that converts to a chapter 7 case. In addition, to be an eligible 
designee, the independent bankruptcy trustee practitioner must 
acknowledge its ERISA fiduciary status in writing.\20\
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    \20\ See U.S. Department of Justice, Executive Office for United 
States Trustees, Handbook for Chapter 7 Trustees, p. 2-1. (October 
1, 2012), for a discussion of eligibility to serve on a panel.
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    The decision to appoint an eligible designee to be the QTA is 
voluntary on the part of the bankruptcy trustee unless it determines 
that the Chapter 7 ERISA Plan is owed delinquent contributions 
(employer and employee) of more than a de minimis amount, as defined in 
the interim final rules. In that case, the interim final rules require 
the bankruptcy trustee to appoint an eligible designee. This change 
responds to comments expressing concern about potential conflicts of 
interest if the same bankruptcy trustee is assigned to represent the 
interests of the estate and to terminate the ERISA plan, and more 
specifically, the requirement to take reasonable steps to collect 
delinquent contributions on behalf of the plan unless such amounts are 
de minimis. The interim final rule mandates appointment of an eligible 
designee in these circumstances so as to address commenters' perceived 
potential for a conflict of interest on the part of the bankruptcy 
trustee. The Department stresses, however, that the bankruptcy trustee 
retains fiduciary responsibility under section 404(a) of ERISA for 
prudently and loyally selecting and monitoring the eligible designee.
    These interim final rules also define ``eligible designee'' to 
address comments asking for clarification that an entity or person is 
not an eligible designee unless it acknowledges and accepts that 
designation. Some commenters were concerned that a bankruptcy trustee 
could force an entity to be an eligible designee and suggested that a 
bankruptcy trustee's appointment of and acceptance by the eligible 
designee should be formalized in writing. In response to these 
comments, the interim final rules clarify in paragraphs (j)(4)(i) and 
(ii) of Sec.  2578.1 that, in addition to the other specified 
conditions, an eligible designee must accept such designation in 
writing. The Department does not believe it is necessary to prescribe 
rules for exactly how a bankruptcy trustee and an eligible designee 
should effect the designation and acceptance. However, the Department 
seeks comment on whether a model acceptance would be useful.
(b) What conditions are necessary to appoint an eligible designee?
    The conditions to appoint an eligible designee are set forth in 
paragraphs (j)(5)(ii) through (v) of Sec.  2578.1.
    First, prior to designating an eligible designee, a bankruptcy 
trustee must make reasonable and diligent efforts to determine whether 
the plan is owed any contributions (employer and employee). Whether the 
plan is owed more than a ``de minimis'' amount of contributions will 
determine whether an eligible designee must be appointed. It will also 
determine whether the eligible designee as QTA must take reasonable 
steps to collect 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. Whether the trustee's efforts to make this 
determination are ``reasonable and diligent'' will depend on the facts 
and circumstances of the case.
    One commenter indicated that bankruptcy trustees may in some cases 
have difficulty obtaining records from the debtor's former management. 
Unfortunately, the Department's experience confirms that inadequate or 
missing records can be a common situation with abandoned plans, and 
this can impact the ability to determine whether delinquent 
contributions are owed. The Department recognizes that when a 
bankruptcy trustee is locating, updating, or recreating records to 
determine if any contributions are owed to the plan, they could incur a 
cost that will exceed the amount of any delinquent contributions. 
Consequently, the Department is of the view that a bankruptcy trustee 
will not have failed to make reasonable and diligent efforts to 
determine whether the plan is owed any contributions merely because the 
trustee reasonably concludes in good faith that it is impossible, or 
would involve significant cost to the plan in relation to the plan's 
total assets, to update or locate the necessary records to make the 
necessary determination. The bankruptcy trustee, after making such 
conclusion, may proceed for purposes of the obligation to collect 
delinquent contributions (discussed below) as if the plan is owed no 
more than a de minimis amount of contributions.
    Second, at the time of the designation, the bankruptcy trustee must 
notify the eligible designee of its findings with respect to the amount 
of delinquent contributions. This notification applies regardless of 
whether the eligible designee is an asset custodian or an independent 
bankruptcy trustee practitioner, and it will enable the eligible 
designee to take appropriate action.
    Third, the bankruptcy trustee must establish procedures for the 
eligible designee to have reasonable access to documents in the 
bankruptcy trustee's possession that may be needed to wind up the plan. 
There is no specific list of documents contemplated by this provision, 
but examples include payroll records, participant lists, plan 
documents, trust statements, or other similar records.
    Fourth, the bankruptcy trustee is responsible for selecting and 
monitoring the eligible designee in accordance with ERISA section 
404(a)(1)(A) and (B). One commenter expressed the view that chapter 7 
bankruptcy trustees in general do not have expertise regarding the 
termination of ERISA plans. The

[[Page 43640]]

commenter argued that the chapter 7 trustee's obligation to the plan 
should terminate upon an eligible designee's appointment. As discussed 
above, the Department does not believe that terminating the chapter 7 
bankruptcy trustee's obligation upon appointment of an eligible 
designee would be consistent with the structure designed by Congress. 
Accordingly, in the interim final rules, the duty to monitor the 
eligible designee is ongoing throughout the termination and winding up 
process until all plan assets are distributed.
    Fifth, a reporting condition attaches to the bankruptcy trustee 
even after the eligible designee has terminated the plan. If the 
bankruptcy estate is still open after the eligible designee winds up 
the plan and the bankruptcy trustee, either directly or through 
monitoring and communicating with the eligible designee, discovers 
evidence of a fiduciary breach by a prior plan fiduciary (e.g., the 
debtor) during this period, the bankruptcy trustee must notify the 
Department of this evidence. See discussion of paragraph (j)(7)'s 
reporting requirement below.

3. Winding up the Affairs of the Plan--Sec.  2578.1(d) and (j)(7)

(a) In General
    The ``winding up'' steps for Chapter 7 ERISA Plans are in 
paragraphs (d) and (j)(7) of Sec.  2578.1. These rules generally are 
the same as the rules for abandoned plans in the 2006 regulations, 
though there are two noteworthy differences.
    The first major difference is with respect to delinquent 
contributions. These interim final rules require a QTA of a Chapter 7 
ERISA Plan that is owed more than a de minimis amount of contributions 
(which would be determined based on both employer and employee 
contributions, combined) to take reasonable steps to collect delinquent 
contributions on behalf of the Chapter 7 ERISA 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. To avoid potential conflicts of interest 
between the bankruptcy trustee's duties to the bankruptcy estate and 
the bankruptcy trustee's duties to the Chapter 7 ERISA Plan, paragraph 
(j) of these interim final rules mandates that the bankruptcy trustee 
appoint an eligible designee when there is an obligation to collect 
delinquent contributions (i.e., the amount of delinquent contributions 
is more than de minimis).
    The second major difference is with respect to reporting evidence 
of a fiduciary breach that involves plan assets by a prior plan 
fiduciary. These interim final rules require any QTA to a Chapter 7 
ERISA Plan to report to the Department any activities that the QTA 
believes may be evidence of fiduciary breaches by a prior plan 
fiduciary (e.g., the debtor).
    The justification for these two differences is that bankruptcy 
trustees, by virtue of their knowledge and control of the debtor's 
estate and ERISA plan, are in a position to:
    (1) know of the liquidating sponsor's delinquent contributions and 
to facilitate the collection of these delinquencies, and
    (2) discover evidence of fiduciary breaches by prior plan 
fiduciaries.
    Paragraph (j)(5)(i) of Sec.  2578.1 contains two alternative tests 
to define what is considered a de minimis amount of delinquent 
contributions, for purposes of the requirement to collect the 
contributions described above.
    The first test focuses directly on the amount of contributions owed 
to the plan and provides that delinquent contribution amounts are de 
minimis if they are $2,000 or less. As noted above, this would be 
determined taking into account both delinquent employee and employer 
contributions. The Department estimates that $2,000 fairly represents 
what it typically would cost to review the bankruptcy case and to file 
a liquidated proof of claim, two steps ERISA's fiduciary standards 
would require in bankruptcy cases with delinquent contributions in need 
of protection. As such, the first test allows a plan owed only $2,000 
or less in delinquent contributions to avoid potentially costly 
collection efforts.
    The second test focuses on the ``net worth'' of the source of 
recovery. The test provides that delinquent contribution amounts 
greater than $2,000 are to be considered de minimis if the property 
from which to collect delinquent contributions is an amount (i.e., a 
realizable value) that is equal to or less than $2,000 net of all 
enforceable liens and applicable exemptions. In effect, delinquent 
contributions (whatever the actual amount) are considered de minimis in 
amount when property in the bankruptcy case is likely equal to or less 
than the $2,000 de minimis amount. Although the plan has a legitimate 
claim against the bankruptcy estate, this test dispenses with the need 
to pursue a claim where it is reasonably evident there is insufficient 
property of value from which to collect delinquent contributions or to 
cover the plan's cost of filing a liquidated proof of claim. As part of 
the general request for comments in Section F of the preamble below, 
the Department is specifically asking for comment on the definition of 
``de minimis'' in these interim final rules.
    The de minimis rule in these interim final rules was added in 
response to comments expressing concern about the bankruptcy trustee's 
obligations to collect delinquent contributions. One commenter opposed 
placing any responsibility to collect delinquent contributions on 
chapter 7 bankruptcy trustees. The commenter noted that outside of the 
bankruptcy context, QTAs are obligated only to report known 
delinquencies to the Department, rather than taking steps to collect 
the delinquent contributions. The commenter also asserted that 
bankruptcy trustees do not generally have working knowledge of the 
prior business operations of the debtor.
    Commenters also addressed whether the requirement to collect 
delinquent contributions creates a conflict of interest for chapter 7 
bankruptcy trustees. One commenter asserted that bankruptcy trustees 
would face a conflict of interest in every case in which there is a 
reasonable likelihood that there are unpaid plan contributions due from 
the debtor or any other potential liability that the debtor (and now 
the bankruptcy estate) owes the plan. The commenter suggested, as one 
possibility, that a panel of chapter 7 trustees with special training 
could be appointed to liquidate ERISA plans. As another alternative, 
the commenter suggested that chapter 7 trustees should be permitted to 
provide the Department with a list of delinquencies they have 
reasonably discovered. On the other hand, a different commenter did not 
see any conflict between the role of the chapter 7 trustee and the 
obligation to collect delinquent contributions, as the commenter stated 
that the contributions due to ERISA plans that are attributable to 
workers' deferred wages are not the property of the estate under the 
Bankruptcy Code. The commenter further stated that because employer 
contributions are claims entitled to priority under the Bankruptcy 
Code, it is particularly important for the chapter 7 trustee to 
determine whether any delinquent employer contributions are owed to the 
plan. The commenter suggested that the chapter 7 trustee's obligations 
to collect delinquent employer contributions should be phrased as the 
trustee's obligation to pay amounts consistent with the payment 
priorities in section 507(a)(4) and (a)(5) of the Bankruptcy Code, and 
to file a claim for any excess amounts.
    After consideration of these comments, the Department continues to

[[Page 43641]]

believe that the bankruptcy trustee's knowledge and control over the 
debtor's estate in combination with its obligations under BAPCPA 
justify the interim final rules' requirement to designate an eligible 
designee as the QTA to take reasonable steps to collect delinquent 
contributions of more than a de minimis amount. This approach is not 
based on the belief that chapter 7 bankruptcy trustees have access to 
information on the business' operation prior to the entity filing for 
bankruptcy, but rather on the bankruptcy trustee's existing control and 
access to current information. However, the obligation will not attach 
if the plan is owed no more than a de minimis amount of contributions. 
Further, the interim final rules in certain instances mandate that the 
bankruptcy trustee appoint an eligible designee to assume its 
responsibilities under the program with respect to the plan to avoid 
placing the bankruptcy trustee in conflict with the bankruptcy 
estate.\21\ In such cases, the bankruptcy trustee would still be under 
an obligation to cooperate with the designee in the performance of 
those duties.
---------------------------------------------------------------------------

    \21\ One commenter sought from the Department a list of approved 
QTAs; however, the Department does not keep such a list.
---------------------------------------------------------------------------

(b) Payment of Fees and Expenses
    Because the winding up rules in the interim final rules are 
essentially the same for Chapter 7 ERISA Plans as they are for 
abandoned plans, the provisions governing payment of fees and expenses 
from plan assets also are essentially the same for both kinds of plans. 
The fee provisions generally provide that plan assets may be used to 
pay reasonable expenses of plan termination. What is reasonable is 
judged in light of industry rates for ordinary plan administration 
under ERISA.\22\ Consequently, these provisions do not allow a 
bankruptcy trustee or eligible designee to charge attorney-level rates 
for plan administration activities of termination and winding up the 
plan.
---------------------------------------------------------------------------

    \22\ 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 website (see 
https://www.askebsa.dol.gov/AbandonedPlanSearch/).
---------------------------------------------------------------------------

    Several commenters addressed this aspect of the proposal. One 
commenter expressed support for the proposal on the bases that that 
there should be no reason for chapter 7 trustees to charge higher fees 
for ordinary plan administration services and the fee limitation would 
help preserve the value of participants' retirement savings. Other 
commenters believed that chapter 7 bankruptcy trustees should not be 
limited to charging plan administration industry rates for their 
services, since their compensation would normally be higher for 
bankruptcy case administration. One commenter indicated the fee 
provisions would be a disincentive for chapter 7 bankruptcy trustees to 
take an active role in the termination and winding up activities. 
Another commenter asserted that chapter 7 trustee compensation is 
routinely reviewed by the presiding bankruptcy judge and the Department 
would be permitted to object in bankruptcy proceedings if it thought a 
trustee's compensation exceeded statutory limits.
    The Department declines to make the specific changes requested by 
the commenters but has revised these interim final rules to include a 
limited exception to the general rule regarding fees. The limited 
exception would apply to services provided by the eligible designee in 
connection with the duty to collect delinquent contributions on behalf 
of the plan. Under the exception, the fees must be consistent with 
rates ordinarily charged by firms or individuals representing or 
assisting a bankruptcy trustee in performing similar collection 
services on behalf of an estate in a chapter 7 proceeding. This limited 
exception applies to activities such as filing proofs of claims, 
tracing assets, responding to objections, motion practice, and 
litigation on behalf of the plan, but it does not apply to determining 
whether the plan is owed contributions. The act of determining whether 
a plan is owed a contribution is a routine act of plan administration 
and is therefore covered under the general rule rather than the 
exception.
4. Rule of Accountability--Sec.  2578.1(j)(8)
    The interim final rules retain the rule of accountability from the 
proposal. Paragraph (j)(8) provides that the bankruptcy trustee or 
eligible designee shall not, for themselves or the other, through 
waiver or otherwise, seek a release from liability under ERISA, or 
assert a defense of derived immunity (or similar defense) in any action 
brought against the bankruptcy trustee or eligible designee arising out 
of its conduct under the regulation.
    The rule of accountability, as proposed, was based on the fact that 
the ERISA plan and its assets are not part of the estate. Accordingly, 
the rule merely sought to preserve this legal distinction by preventing 
bankruptcy trustees from using bankruptcy courts to insulate themselves 
from liability under ERISA for fiduciary breaches.\23\
---------------------------------------------------------------------------

    \23\ See Kirschenbaum, 777 F.3d at 597.
---------------------------------------------------------------------------

    The Department received several comments on the proposed rule of 
accountability. One commenter supported the proposed rule on the basis 
that paragraph (e) of Sec.  2578.1 already limits ERISA liability for 
QTAs. Another commenter expressed concern that the rule of 
accountability would result in bankruptcy trustees' unwillingness to 
participate in the Abandoned Plan Program because the commenter 
believed the rule would interfere with the trustee's ability to seek 
bankruptcy court approval even when required to do so by the Bankruptcy 
Code. The commenter provided an example stating that bankruptcy 
trustees must seek bankruptcy court approval to hire appraisers, real 
estate brokers and auctioneers. The commenter recommended that the 
Department require that the Department be provided sufficient notice to 
object and have an opportunity to be heard regarding any proposed 
action in the bankruptcy court.
    The Department does not believe the rule of accountability 
interferes with action required under the Bankruptcy Code. As stated in 
the preamble to the proposal, paragraph (j)(8) does not prevent a 
bankruptcy trustee from asking a court to resolve an actual dispute 
involving a plan or from obtaining an order required under the U.S. 
Bankruptcy Code. However, the rule of accountability would bar a 
trustee from seeking a ruling from a court for approval of its actions 
as a QTA. For example, as discussed above, the Department does not 
believe a bankruptcy court has jurisdiction to approve the payment to a 
professional from assets of the plan.
    The Department continues to believe that the rule of accountability 
strikes the correct balance by permitting bankruptcy trustees to 
continue existing practices under the Bankruptcy Code while preventing 
them from seeking additional comfort from a bankruptcy court regarding 
compliance with ERISA as set forth in the Abandoned Plan Program. 
Beyond this principle, the Department did not adopt the commenter's 
suggestion to eliminate the rule of accountability in favor of the 
Department receiving notice and opportunity to be heard regarding any 
proposed action in the bankruptcy court.
    One commenter expressed the view that the proposal did not go far 
enough in ensuring that bankruptcy courts do

[[Page 43642]]

not relieve chapter 7 trustees from their obligations to plans. The 
commenter asked the Department to include additional information 
providing guidance on the manner in which the Department would prevent 
bankruptcy courts from discharging bankruptcy trustees from acting as 
fiduciaries with respect to the plans. As noted above, the Department 
believes it has struck an appropriate balance in this regard and 
therefore the Department has not included additional statements or 
information on this issue.
    The Department seeks commenters' views on the construct of the rule 
of accountability in these interim final rules and whether specific 
changes are recommended.

C. Technical Comments Unrelated to the Expansion to Chapter 7 ERISA 
Plans

    Several comment letters raised technical issues dealing with the 
Abandoned Plan Program in general, as opposed to Chapter 7 ERISA Plans 
specifically. The major comments are addressed below.

1. Removal of Statement of Investigation From the Notice of Plan 
Abandonment--Sec.  2578.1(c)(3)

    Consistent with the proposal, these interim final rules remove the 
requirement that a QTA state whether it or any affiliate is, or in the 
past 24 months was, 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. 
QTAs were required to include this statement in the notice of plan 
abandonment furnished to the Department before a plan could be deemed 
terminated and wound up.\24\
---------------------------------------------------------------------------

    \24\ See paragraph (c)(3)(i)(C) of Sec.  2578.1 in the 2006 
final regulations.
---------------------------------------------------------------------------

    Although such information alone would not bar a person from serving 
as a QTA, the statement served as a flagging mechanism to help the 
Department identify arrangements that potentially were not in the best 
interests of plan participants and beneficiaries. However, in the 
preamble to the 2012 proposal, the Department stated that generally it 
can determine from its own records whether a person is, or in the past 
24 months was, the subject of such an investigation. Additionally, some 
otherwise qualified persons have expressed reluctance to serve as a QTA 
if they must affirm in a notice to the federal government that they or 
an affiliate are or were under such an investigation, examination, or 
enforcement action.\25\
---------------------------------------------------------------------------

    \25\ See 77 FR 74068.
---------------------------------------------------------------------------

    The Department proposed to remove the requirement as unnecessary in 
light of other information sources available to the Department. The 
Department received two comments supporting the removal of the required 
statement of investigation. There were no comments opposing elimination 
of the requirement. Therefore, for the reasons stated in the proposal, 
the Department is removing the required investigation statement. In 
conjunction with removing the statement, the Department is removing a 
definition of the term ``affiliate'' from paragraph (h)(2) of Sec.  
2578.1 of the 2006 regulations, which was applicable only to the 
investigation statement. The generally applicable definition of the 
term ``affiliate'' in paragraph (h)(1) of Sec.  2578.1 remains in 
effect.

2. Forfeitures/Small Accounts--Sec.  2578.1(d)(2)(ii)

    With respect to applying the forfeiture provision in paragraph 
(d)(2)(ii) of section 2578.1 of the 2006 regulations, one commenter 
asked for clarification that a QTA can employ a de minimis exception 
for very small accounts where the cost of locating a participant would 
use up the account balance. The commenter noted that the general 
guidelines for winding up the affairs of a plan currently permit a QTA 
to treat as forfeited an account balance that is less than the 
estimated share of plan expenses allocable to the account.\26\ The 
commenter asked for clarification or revision to the provision so that 
the rule would cover the estimated costs of locating the participant in 
addition to the estimated share of plan expenses allocable to the 
account.
---------------------------------------------------------------------------

    \26\ 29 CFR 2578.1(d)(1)(ii).
---------------------------------------------------------------------------

    Although forfeitures are permitted under these interim final rules, 
they are permitted only after a reasoned judgment that a participant's 
allocable share of anticipated plan expenses is likely to exceed their 
account balance. The Department's view is that it is not reasonable to 
assume that every participant with a small account balance will be 
missing. Therefore, allocating a predetermined search cost for 
participants whom the QTA has no reason to believe are missing would 
not ordinarily be considered reasonable for purposes of the forfeiture 
provision.
    On the other hand, if a QTA were to determine that it must search 
for a specific participant--for example, if a Notice of Plan 
Termination sent to that participant was returned ``undeliverable''--
the reasonable cost of searching for the participant would be a 
permissible plan expense and could be allocated entirely to the account 
of the missing participant in accordance with the principles in EBSA 
Field Assistance Bulletin 2003-03.\27\ Accordingly, the Department 
determined that no changes are needed to the 2006 regulations, which 
leave such forfeiture determinations to a case-by-case determination 
based on the relevant facts and circumstances.
---------------------------------------------------------------------------

    \27\ Whether the cost of a particular search is reasonable 
depends on the facts and circumstances of the case. The Department, 
however, notes that a QTA should avoid search methods that cost more 
than the participant's account balance. See EBSA Field Assistance 
Bulletin 2014-01. For example, if the cost of a particular search 
method were to exceed the missing participant's account balance, the 
QTA should consider less costly search methods, such as those 
identified in FAB 2014-01. However, if the QTA reasonably determines 
that the cost of any of the available search methods would exceed 
the missing participant's account balance, the QTA may avoid a 
search and treat the account as forfeited under paragraph (d)(2)(ii) 
of section 2578.1.
---------------------------------------------------------------------------

    In this regard, the Department also seeks comment on the current 
provision in 2578.1(d)(2)(ii)(B) for allocating expenses to participant 
accounts in the absence of a governing plan document provision. The 
provision permits expenses to be allocated on a pro rata basis 
(proportionately in the ratio that each individual account balance 
bears to the total of all individual account balances) or per capita 
basis (allocated equally to all accounts). Do commenters believe that 
this flexibility is appropriate? For example, should the Department 
consider adding provisions to the regulation that would provide 
guidelines for the types of fees and circumstances that would be 
appropriate for per capita versus pro rata methods of allocation?

3. Distribution Alternatives/Missing Participants

    Under the 2006 regulations, missing participant accounts were 
generally required to be distributed to individual retirement plans. In 
the case of a distribution by a QTA in 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 QTA to the public at the time of the distribution, the 
QTA may distribute a missing or non-responsive participant's account 
balance to:
    (i) an interest-bearing federally insured bank or savings 
association account in the name of the participant or beneficiary;

[[Page 43643]]

    (ii) the unclaimed property fund of the State in which the 
participant's or beneficiary's last known address is located; or
    (iii) an individual retirement plan offered by a financial 
institution other than the QTA to the public at the time of the 
distribution.\28\
---------------------------------------------------------------------------

    \28\ Paragraphs 2578.1(d)(vii)(B)(1) and 2550.404a-3(d).
---------------------------------------------------------------------------

    Commenters requested that the Department raise the $1,000 threshold 
to $5,000 and eliminate the condition that the amount be less than the 
minimum amount required to be invested in an individual retirement plan 
product offered by the QTA to the public at the time of the 
distribution. This would allow QTAs to distribute more accounts of 
missing or non-responsive participants to bank or savings accounts or 
State unclaimed property funds than under the current rule. According 
to the commenters, individual retirement plans (e.g., IRAs) for very 
small balances are not profitable or widely available, and though some 
financial institutions offer IRAs with low minimum-balance 
requirements, they tend to do so only as a way to create and maintain 
relationships with customers who, unlike missing and non-responsive 
participants, are likely to regularly contribute to and grow their 
accounts. The commenters suggested that their recommended changes could 
increase the likelihood that more asset custodians would elect to serve 
as QTAs than under the current system, thereby eliminating more 
abandoned plans.
    The Department is not adopting the commenters' suggestions at this 
time but seeks additional comment on the merits of various distribution 
options. The Department's regulations regarding default distributions 
and the Abandoned Plan Program historically have preferred IRAs to 
other distribution options for several reasons. A distribution that 
qualifies as an eligible rollover distribution from a qualified plan, 
which is handled by a trustee-to-trustee transfer into an individual 
retirement plan, will avoid immediate taxation. An eligible direct 
rollover results in the deferral of income tax, avoids 20 percent 
mandatory withholding, and avoids any 10 percent additional tax for 
early distributions that might otherwise apply.\29\ Funds in the 
individual retirement plan continue to grow on a tax-deferred basis so 
that funds are not subject to federal income tax until distributed.\30\
---------------------------------------------------------------------------

    \29\ See Code Sec. Sec.  402(a), 3405(c), and 72(t).
    \30\ Depending on state law, state and local income taxes also 
may be subject to deferral.
---------------------------------------------------------------------------

    In contrast, funds transferred to a bank/savings account or State 
unclaimed property fund generally are subject to income taxation, 
mandatory income tax withholding, and a possible additional tax for 
premature distributions. Moreover, any interest that accrues after the 
transfer would generally be subject to income taxation upon 
accrual.\31\
---------------------------------------------------------------------------

    \31\ See e.g., IRS Rev. Rul. 2020-24, Withholding and Reporting 
With Respect to Payments From Qualified Plans to State Unclaimed 
Property Funds.
---------------------------------------------------------------------------

    Another option is the Pension Benefit Guaranty Corporation's 
Missing Participants Program for Defined Contribution Plans pursuant to 
29 CFR 4050.201-207 (PBGC Program). In Field Assistance Bulletin 2021-
01, the Department provided a temporary enforcement policy under which 
it will not pursue violations under section 404(a) of ERISA against 
either responsible plan fiduciaries of terminating defined contribution 
plans or QTAs of abandoned plans when a missing or non-responsive 
participant's or beneficiary's account balances are transferred to the 
PBGC Program rather than to an IRA, certain bank accounts, or to a 
State unclaimed property fund, as specified in 29 CFR 2550.404a-3. The 
plan fiduciary or QTA must comply with the guidance in the FAB and act 
in accordance with a good faith, reasonable interpretation of section 
404 of ERISA with respect to matters not specifically addressed in the 
FAB.
    The Department is continuing that temporary enforcement policy 
under these interim final rules. As described below in its general 
request for comments in Section F, the Department requests comment on 
whether the PBGC Program gives missing participants a better chance 
than the other available distribution options of being reunited with 
their retirement savings and should therefore be formally incorporated 
into the Department's regulation at 29 CFR 2550.404a-3. The Department 
further requests comments on whether the PBGC Program should be used as 
a replacement for all other distribution options in the case of plans 
eligible for the PBGC Program.
    Also, with respect to missing participants, the Department requests 
comments on the methods of providing the participant notices required 
under 2550.404a-3. One commenter asserted that notices provided before 
an involuntary cash out distribution are provided by certified mail. 
The Department seeks comment on whether this is the common way of 
providing notice in that context. The Department also seeks comment on 
whether QTAs are generally unable to rely on the electronic disclosure 
safe harbors in 29 CFR 2520.104b-1 because they are unable to satisfy 
the conditions for the safe harbors, and if so, whether additional 
guidance would be useful on the use of electronic disclosure 
technologies to provide notices under the Abandoned Plan Program 
regulations.

4. Distributions/Missing Participants/IRAs Offered by Institutions 
Other Than the QTA--Paragraph (d)(2)(vii)(B)(1) of Sec.  2578.1 & 
2550.404a-3

    One commenter asked for clarification on whether a QTA must accept 
distributions above $1,000 on behalf of missing or non-responsive 
participants or if they may instead distribute the account balance to 
an individual retirement plan offered by an institution other than the 
QTA.
    Although the interim final rules generally contemplate that a QTA 
will designate itself as the provider of an individual retirement plan 
for such participants, this outcome is not required under the interim 
final rules (or the 2006 regulations). A QTA may distribute such 
account balances to an individual retirement plan offered by an 
institution other than the QTA, provided that the conditions of the 
interim final rules are satisfied, including those set forth in Sec.  
2550.404a-3. A QTA would be responsible as a fiduciary for the 
selection of this provider, as set forth in paragraph (e) of Sec.  
2578.1 (entitled ``Limited liability'').

5. Distributions/Deceased Participants--Sec.  2550.404a-3(d)(1)(v)

    Sometimes a QTA will know that a missing participant whose account 
balance is greater than $1,000 is deceased and that there is no 
designated beneficiary, or the beneficiary also is deceased. In such 
circumstances, the 2006 regulations require the QTA 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 was advised that, in some cases, providers of individual 
retirement plans will not accept such distributions.
    The 2012 proposal contained a special rule to address this 
situation. As proposed, the special rule would conditionally permit 
QTAs 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, instead of to an individual retirement 
plan. The conditions allowed such a transfer if the QTA reasonably and 
in good faith finds that the participant and named

[[Page 43644]]

beneficiary, if applicable, were deceased, and includes in the Final 
Notice filed with the Department the identity of the deceased 
participant (and beneficiary as applicable) and the basis for the 
finding.\32\ The proposal's preamble solicited comments on whether the 
proposed conditions sufficiently safeguard the rights of participants 
and beneficiaries and asked in particular whether a QTA should be 
prohibited from making these transfers if the QTA has actual knowledge 
that a descendant of the deceased participant or beneficiary has a 
claim.
---------------------------------------------------------------------------

    \32\ A commenter sought additional guidance on what would 
constitute a valid basis for determining that a participant is 
deceased. The reasonable and good faith standard is a factual 
standard that would require evaluation of all the surrounding 
circumstances.
---------------------------------------------------------------------------

    Commenters raised three general concerns about the workability of 
the special rule. First, QTAs often do not have beneficiary designation 
forms in their possession because the responsibility for maintenance of 
such forms was retained by the sponsor or delegated to another person 
who either cannot be located or no longer maintains possession of the 
records. Thus, in this scenario, QTAs cannot determine whether a living 
beneficiary exists. Second, often the participant's estate is 
designated (either affirmatively or by default) as the participant's 
beneficiary, and because estates cannot be ``deceased'' in the normal 
sense of that word, commenters indicated that the special rule should 
not be available in this circumstance. Third, QTAs sometimes are on 
notice that a descendant of the deceased participant or beneficiary 
claims to have a valid right under probate law and such descendant may 
or may not be a designated beneficiary under the plan terms and ERISA. 
In these circumstances, the commenters cautioned against outcomes that 
could lead to escheatment.
    After considering the public comments, these interim final rules 
adopt the proposal's special rule permitting transfer of the deceased 
participant's account balance to an appropriate bank account or State 
unclaimed property fund in the name of the participant, even if the 
account balance exceeds $1,000, but with several modifications in 
response to the matters raised by the commenters intended to facilitate 
the termination and winding up of abandoned plans.
    The first modification clarifies that the special rule is available 
for situations when, despite reasonable and good faith efforts, the QTA 
is unable to locate plan records that identify a beneficiary. See Sec.  
2550.404a-3(d)(1)(v)(A)(2). The interim final rules make clear that the 
special rule is available in these circumstances only if the QTA first 
conducts a reasonable search, consistent with the requirements of 
section 404 of ERISA, for the participant's beneficiary designation 
form.
    Second, the special rule was expanded to cover situations when the 
beneficiary is the estate of the participant, without regard to whether 
the designation was affirmative or by default. See Sec.  2550.404a-
3(d)(1)(v)(B). However, availability of the special rule in these 
circumstances, depends on the QTA meeting certain conditions.
    One condition is that the QTA first must make reasonable and good 
faith efforts to determine whether or not an estate exists before a 
transfer is permitted under the special rule. These interim final rules 
do not specify a method for satisfying this condition, as it will 
depend on the facts and circumstances of the particular case. However, 
the mere fact that an executor or administrator of an estate has not 
affirmatively contacted the QTA would not be sufficient evidence for 
the QTA to reach the requisite finding required by the condition.
    Another condition is that the QTA must reasonably and in good faith 
find that it is unable to establish an individual retirement plan for 
the benefit of the estate of the participant. For example, this might 
occur if a QTA were to conclude that it is precluded by law from 
establishing an individual retirement plan for the benefit of an estate 
(as opposed to an individual) or if a bankruptcy trustee is unable 
after reasonable efforts to locate an individual retirement plan 
provider who will accept such a distribution.
    Third, in response to concerns about potential litigation and 
competing claims by descendants and others, the special rule contains a 
new limitation--in no circumstance is the special rule available if the 
QTA has actual knowledge of any claims of a person purporting to have a 
right to all or part of the deceased participant's account. See 
paragraphs (d)(1)(v)(A)(4) and (B)(2) of Sec.  2550.404a-3. For 
example, this might occur if the descendant of a deceased participant 
contacts the QTA in writing to assert a purported interest in the 
decedent's account balance. The Department agrees with the commenters 
that, in these circumstances, the QTA is on notice of the existence of 
a person who is or may become eligible to receive a benefit from the 
plan and that a transfer under the special rule may be inconsistent 
with or frustrate the rights of such person.
    Finally, these interim final rules adopt the requirement that the 
QTA must document the relevant findings under the special rule and 
include this information in the Final Notice to the Department. See 
paragraph (d)(1)(v)(c) of Sec.  2550.404a-3. This condition serves at 
least two purposes. First, it protects participants and beneficiaries 
by ensuring a determination of death is not premature and that 
reasonable and diligent efforts to find designated beneficiaries 
occurred. Second, it also prevents abuse of the special rule, limiting 
the number of transfers to bank or savings accounts or State unclaimed 
property funds.

6. QTA's Limited Liability--Sec.  2578.1(e)

    Several commenters also asked the Department to make additional 
confirmations regarding the scope of liability of QTAs. One commenter 
asked whether the relief afforded by the Abandoned Plan Program 
regulations would extend to functions that are not addressed in the 
regulations, such as responding to domestic relations orders relating 
to benefits under the plan. The Department believes that it has 
constructed a regulatory framework that serves to minimize to the 
greatest extent possible the liability and exposure of QTAs who carry 
out their responsibilities in accordance with the provisions of the 
regulation. However, the limited liability provisions focus on the 
QTAs' activity winding up the affairs of the plan. For areas not 
addressed in the Abandoned Plan Program regulations, QTAs can look to 
the Department's more general guidance provided through advisory 
opinions, information letters, field assistance bulletins, interpretive 
bulletins, and other compliance assistance materials already available 
that address duties and obligations beyond the specific winding up 
affairs performed by QTAs.
    Another commenter asked about the liability of the QTA after the 
abandoned plan is terminated and assets are distributed, particularly 
with respect to missing participants. The commenter urged the 
Department to clarify that a QTA that has substantially complied with 
the Abandoned Plan Program regulations would have no continuing 
liability for subsequent actions taken by the transferee of the assets. 
In this regard, paragraph (e)(ii) of Sec.  2578.1 provides that the QTA 
is not responsible for monitoring a service provider selected in 
accordance with Sec.  2550.404a-3, which provides a safe harbor for 
fiduciaries in connection with distributions from terminated

[[Page 43645]]

individual account plans. However, the Department cautions that it is 
unable to confirm that limited liability is available for 
``substantial'' compliance. The Department is also unable to confirm in 
response to a similar comment that fiduciary relief would necessarily 
be available for certain activities of the QTA even if the QTA fails to 
meet every applicable requirement of the program. The extent of the 
QTA's liability would depend on the surrounding facts and 
circumstances.

7. Notices and Special Terminal Report--Sec.  2578.1(c)(3) and (j)(6), 
Sec.  2578.1(d)(2)(ix), and Sec.  2520.103-13

    In response to a comment, the Department added spaces in the model 
notices to identify fiduciary breaches, as is required in connection 
with Chapter 7 ERISA Plans under these interim final rules. 
Specifically, the spaces were added in the Notification of Intent to 
Serve as a QTA to be used in connection with Chapter 7 ERISA Plans 
(Appendix C to part 2578) and in the Final Notice (Appendix E to part 
2578). The commenter also asked why there is a Notice of Plan 
Termination in Appendix D part 2578 when the Appendix A to part 2550 
appears to serve the same function of providing a model notice to be 
used for participant contributions. The Department agrees that the two 
model notices serve similar functions but the model notice in Appendix 
D to part 2578 contains a provision specific to the QTA context. The 
Department believes that it is most user friendly to provide the model 
notice for participant contributions as an appendix to part 2578 where 
other model notices that are specific to the Abandoned Plan Program are 
located. However, the Department made other minor and clarifying edits 
to the model forms included in the appendices to the Abandoned Plan 
Program regulations.
    In response to comments, these interim final rules also streamline 
and update the process for filing notices and reports in two 
significant ways. First, the Special Terminal Report for Abandoned 
Plans (STRAP), see Sec.  2520.103-13 is now a single, stand-alone form, 
as opposed to a collection of data from various parts of the Form 5500 
Annual Return/Report of Employee Benefit Plan. Second, the interim 
final rules establish a new optional online method to file the STRAP 
and other notices, as opposed to the existing email or paper-based 
system.
    With respect to the STRAP, the Department added language to 29 CFR 
2520.103-13(b) to clarify that content requirements of the STRAP must 
be provided in accordance with the instructions for the STRAP posted on 
the Department's website. Pursuant to Sec.  2520.103-13(b)(1), which 
authorizes the collection of plan information, the Department added a 
question to the STRAP to assist the Department in understanding the 
types of defined contribution plans that are terminated under the 
Abandoned Plan Program (e.g., single-employer, multiemployer, multiple-
employer, 401(k), 403(b) plans, etc.). These interim final rules add 
new paragraphs (b)(6) and (7) to Sec.  2520.103-13, which ask for the 
total number of distributions and the number of distributions to 
missing participants included in that total. Because the Department 
often requests this information, these interim final rules add this 
information requirement to the STRAP to improve the efficiency of the 
program. In this regard, the Department is considering including a 
provision in the final rules that would either explicitly require QTAs 
to maintain records regarding the location of distributions of the 
accounts of missing participants, or that would require such 
information be provided in the STRAP. The Department seeks comment on 
these potential requirements as well as the extent to which QTAs 
currently maintain records on the location of these accounts and the 
length of time that the records are kept.
    Since the STRAP is now a stand-alone form, the Department can no 
longer rely on the penalties and perjury statement embedded in the Form 
5500 Annual Report. Accordingly, new paragraph (b)(8) adds a penalties 
and perjury statement to the content requirements of Sec.  2520.103-13.
    The Department also eliminated from the STRAP the requirements to 
report plan administrator identification information, whether the plan 
is collectively bargained, and the effective date of the plan. The 
Department concluded that information is not needed on the STRAP and 
should be available from prior Form 5500 filings for the plan or can be 
requested from the QTA to the extent the information is relevant in a 
particular case under the Abandoned Plan Program. The STRAP form and 
the instructions will be available on the Abandoned Plan Program 
section of EBSA's website.
    The new optional online filing system--called the ``Abandoned Plan 
Program Online Filing System''--will provide a more efficient 
alternative method for QTAs to submit required notices to the 
Department because it will streamline the process. The Department will 
issue a press release when the online filing system becomes available. 
At that time, instructions for completing and filing notices and the 
STRAP through the online filing system will be available on the 
Abandoned Plan Program section of EBSA's website. The online system 
also will benefit the Department by enabling its staff to more 
efficiently receive, process, and review notices and STRAPs, which in 
turn will benefit QTAs and participants of the plans they are winding 
up. The Department expects that QTAs who opt to electronically submit 
notices and the STRAP will make fewer errors due to the web-based 
procedures and instructions that can ensure greater accuracy of data. 
The Department also expects transcription and other errors by the 
Department will be fewer because of the automated process that will 
occur when submissions are received electronically.
    The new online filing system is voluntary under these interim final 
rules pending the adoption of the final rules. The Department is 
inclined to make the online filing system the exclusive method of 
filing Abandoned Plan Program notices and the STRAP. Accordingly, the 
Department is interested in receiving comments on whether it should 
make electronic filing mandatory as part of the final rules.

D. Internal Revenue Code Qualification Requirements

    As it did in connection with the existing Abandoned Plan Program, 
the Department conferred with representatives of the Internal Revenue 
Service (IRS) regarding the qualification requirements under the 
Internal Revenue Code as applied to plans that are terminated pursuant 
to 29 CFR 2578.1, as modified by these interim final rules. The IRS has 
informed the Department that the modification in these interim final 
rules does not impact the correction principles currently memorialized 
in section 6.02(2)(e)(i) of Revenue Procedure 2021-30, 2021-31 IRB 172. 
Section 6.02(2)(e)(i) of Revenue Procedure 2021-30 provides that the 
permitted correction for a failure that results from the employer 
having ceased to exist, no longer maintaining the plan, or for similar 
reasons is to terminate the plan and distribute plan assets to 
participants and beneficiaries in accordance with standards and 
procedures substantially similar to those set forth in Sec.  2578.1, 
applicable to individual account plans, provided that the following 
four conditions are met. First, the correction must comply with 
standards and procedures substantially similar to those set forth in 
Sec.  2578.1. Second, the QTA, based on plan records located and 
updated in accordance with

[[Page 43646]]

Sec.  2578.1(d)(2)(i), must have reasonably determined whether, and to 
what extent, the survivor annuity requirements of sections 401(a)(11) 
and 417 of the Internal Revenue Code apply to any benefit payable under 
the plan and must take reasonable steps to comply with those 
requirements (if applicable). Third, each participant and beneficiary 
must have been provided a nonforfeitable right to their accrued 
benefits as of the date of deemed termination under Sec.  2578.1(c)(1), 
subject to investment gains and losses between that date and the date 
of distribution. Fourth, participants and beneficiaries must receive 
notification of their rights under section 402(f) of the Internal 
Revenue Code. Notwithstanding the foregoing, as set forth in Section 
6.02(2)(e)(i) of Revenue Procedure 2021-30, the IRS reserves the right 
to pursue appropriate remedies under the Internal Revenue 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.
    The Department received several comments on the QTAs' 
responsibilities regarding the survivor annuity requirements under 
sections 401(a)(11) and 417 of the Internal Revenue Code. Paragraph 
(d)(2)(vii)(B)(2) of Sec.  2578.1 states that with respect to 
distributions to participants or beneficiaries who fail to make an 
election as to the distribution of benefits, a QTA that determines the 
survivor annuity requirements apply may distribute benefits ``in any 
manner reasonably determined to achieve compliance with those 
requirements.'' This provision was included in the 2006 regulations 
after consultation with the IRS. Commenters on the 2012 proposal asked 
for additional guidance on reasonable compliance with the requirements. 
Commenters also indicated that QTAs may experience practical 
difficulties complying with the survivor annuity requirements due to 
lack of recordkeeping and lack of available annuity options for small 
amounts.
    The Department believes that additional information and 
consultation with the IRS and the Department of the Treasury are 
needed, as the survivor annuity requirements are within their 
jurisdiction.\33\ Accordingly, the Department requests additional 
comments on practical difficulties faced by QTAs complying with the 
survivor annuity requirements.
---------------------------------------------------------------------------

    \33\ See section 101 of Reorganization Plan No. 4 of 1978, 5 
U.S.C. App.
---------------------------------------------------------------------------

E. Comments on Additional Expansion of, or Procedural Changes to, the 
Abandoned Plan Program

1. Expand Scope of Abandoned Plan Program to Plans of Sponsors in 
Liquidation or Receivership

    A few commenters asked that the Abandoned Plan Program be expanded 
to cover a broader range of plans. For instance, one commenter 
requested that the Department consider expanding the 2006 regulations 
to cover plans of debtors in liquidation under chapter 11 of the 
Bankruptcy Code and plans of businesses in state receivership. Another 
commenter requested that the Department consider expanding the 2006 
regulations to cover plans of failed insured depository institutions 
for which the FDIC as receiver acts as the plan sponsor and 
administrator.
    With respect to plans of debtors in liquidation under chapter 11 of 
the Bankruptcy Code, the Department does not believe it has a basis for 
concluding that plans are effectively abandoned as a result of the 
sponsor's chapter 11 petition. Further, expanding the scope of the 2006 
regulations to a broad range of receivership situations was not 
included in the proposal, and the Department does not believe it has an 
adequate public record regarding those other circumstances to ensure 
the Abandoned Plan Program is properly structured to address unique or 
different issues that may be presented. Accordingly, the Department is 
not expanding the scope of the program at this time, as requested by 
some commenters.
    Nonetheless, based on the public comments submitted, greater 
expansion of the program may further the interests of participants and 
beneficiaries in such plans, and the Department believes exploration of 
such possible expansions of the Abandoned Plan Program is merited. As 
part of the general request for comments in Section F of the preamble 
below, the Department is specifically asking for comments on whether--
and, if so, how--to extend the framework of the Abandoned Plan Program 
to cover plans whose sponsors are in bankruptcy under chapter 11 of the 
Bankruptcy Code, or receivership under the FDIC or other applicable 
federal or state law.

2. Expand Definition of QTA to Other Service Providers

    Outside of the bankruptcy context, the program's definition of a 
QTA requires the QTA to be both eligible to serve as a trustee or 
issuer of an individual retirement plan, within the meaning of Internal 
Revenue Code section 7701(a)(37), and to hold assets of the abandoned 
plans. Several commenters asked the Department to expand the definition 
of a QTA so that recordkeepers and third-party administrators could 
serve that role. According to the commenters, these parties may be in a 
greater position than the asset custodian to have data that would be 
useful in the process of terminating a plan, and this expansion could 
increase the number of plans terminated under the Abandoned Plan 
Program. The commenters suggested the Department could limit the 
expansion to parties that are regulated by the Securities and Exchange 
Commission (SEC), noting that the Department had previously declined to 
expand the definition of a QTA to recordkeepers and third-party 
administrators due, in part, to lack of standards and oversight.\34\ 
One commenter noted that in the case of a plan in which the employer 
serves as the trustee, there may technically not be an asset custodian 
that ``holds'' assets of the plan, rendering these plans ineligible to 
participate in the Abandoned Plan Program.
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    \34\ 71 FR at 20821 (``Although the Department recognizes the 
critical role that recordkeepers, third-party contract 
administrators and other service providers to plans can and will 
play in the process of winding up the affairs of an abandoned plan, 
the Department nonetheless believes that, 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. In developing 
its criteria for QTAs, the Department limited QTA status to trustees 
or issuers of an individual retirement plan within the meaning of 
section 7701(a)(37) of the Code because the standards applicable to 
such trustees and issuers are well understood by the regulated 
community and the Department is not aware of problems attributable 
to weaknesses in the existing Code and regulatory standards for such 
persons. The Department believed that the Code and regulatory 
standards could be adopted for purposes of this regulation without 
imposing unnecessary costs and burdens on either plans or potential 
QTAs. The Department notes that, while commenters did propose 
varying procedures and criteria for defining QTA status, there was 
no consensus among the commenters as to what regulatory standards 
might be applicable to such persons. For these reasons, the 
Department is adopting the definition of `qualified termination 
administrator' without change from the proposal.'').
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    The Department is not persuaded by the commenters to expand the 
definition of a QTA as requested at this time. The Department continues 
to believe that regulatory oversight of the QTA is an important 
safeguard of abandoned plans. Further, the Department has concerns 
about service providers taking custody or control of plan assets under 
circumstances in which they have no authorization from the plan sponsor 
to do so. The existing rule, under which QTAs may engage, on

[[Page 43647]]

behalf of the plan, such service providers as are necessary for the QTA 
to carry out its responsibilities, remains preferable.\35\ However, the 
Department welcomes additional comment on this issue, and in 
particular, how the SEC's existing regulations applicable to 
recordkeepers and third-party administrators would protect the 
interests of the abandoned plans and their participants and 
beneficiaries.
---------------------------------------------------------------------------

    \35\ 2578.1(d)(2)(iv).
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3. Plans With Small Asset Balances/Plans Funded Through Annuities

    One commenter encouraged the Department to consider a limited and 
expedited QTA process for plans with only a small amount of total 
assets, such as a few thousand or even a few hundred dollars. In such 
cases, charging the plan to cover the costs of the Abandoned Plan 
Program may deplete some plans' remaining assets. The commenter 
envisioned that parties holding the assets could provide the Department 
with pre-termination reports with relevant information and the 
Department could then approve immediate distributions to remaining 
participants where such persons can be located. Commenters also raised 
the issue of plans that are funded through annuities and noted that 
there does not appear to be a mechanism for a QTA to be paid from the 
plan's assets when the annuity contract does not permit deduction of 
service fees.
    While the Department is sympathetic to these concerns, it has not 
made any changes to these interim final rules in response. A change to 
the program to provide a special procedure for plans with few assets 
would require careful consideration of how best to protect the 
interests of the participants and beneficiaries in these plans and 
would benefit from additional public comment. Additionally, there does 
not appear to be a ready means of adapting the program to plans funded 
by annuities that do not permit deduction of service fees. The 
Department welcomes additional comment on these areas that may inform 
future regulatory activity.

4. Requested Procedure for Future Program Changes

    One commenter asked whether the program could be structured in a 
way to allow changes to be implemented more frequently and more 
quickly. The commenter noted that the program is currently structured 
as a series of regulations and a prohibited transaction exemption, 
which require notice and opportunity for public comment before adoption 
of changes, while other programs such as the Department's Delinquent 
Filer Voluntary Compliance Program, are published as notices.
    The Department believes that the structure of the existing program 
in the form of regulations and a prohibited transaction exemption 
benefits affected parties by providing certainty beyond what could be 
provided in the form of an enforcement policy or other type of notice. 
That structure does not prevent the Department from issuing opinions or 
other subregulatory guidance interpreting or clarifying the program's 
requirements.

F. Request for Comments

    The Department believes that the interim final rules address the 
major comments raised with respect to the 2012 proposal and improve the 
program, especially with respect to the inclusion of Chapter 7 ERISA 
Plans. However, as noted above, the Department acknowledges that the 
2012 proposal was published more than 10 years ago and that these 
regulations have been published as interim final rules with a request 
for comments. This approach will enable bankruptcy trustees to begin 
taking advantage of the voluntary termination and winding up procedures 
almost immediately, while allowing for comments and possible further 
improvement of the Abandoned Plan Program. Although the Department will 
accept comments from interested persons on all aspects of these interim 
final rules in accordance with the instructions for submitting comments 
in the ADDRESSES section of this document, the Department specifically 
invites comments on the following subjects.
    First, comments are requested on the two alternative tests in 
paragraph (j)(5)(i) of section 2578.1 for determining whether 
contributions are de minimis in amount, including whether the $2,000 
threshold is sufficiently protective of plan participants and 
beneficiaries and whether the Department should add a provision for 
indexing that threshold for inflation. Any comments suggesting that the 
$2,000 threshold is too low should suggest a specific dollar threshold 
with supporting analysis.
    Second, the Department requests comment on the requirement for 
eligible designees to take reasonable steps to collect 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, and 
the expansion of the definition of eligible designee to include an 
independent bankruptcy trustee practitioner.
    Third, comments are requested on whether, and if so, how, to extend 
the framework of the Abandoned Plan Program to cover plans whose 
sponsors are in liquidation under chapter 11 of the Bankruptcy Code, 
state receivership, or receivership under the FDIC. Commenters on this 
issue are encouraged to explain the need for such an extension for each 
type of liquidation or receivership, including the anticipated costs 
and benefits to affected parties.
    Fourth, the Department is interested in comments on whether it 
should incorporate the PBGC Program into 29 CFR 2578.1. On December 22, 
2017, PBGC established the PBGC Program to hold retirement benefits for 
missing participants and beneficiaries in most terminated defined 
contribution plans and to help those participants and beneficiaries 
find and receive those benefits. See 29 CFR 4050.201-207. The PBGC 
cites multiple benefits of the PBGC Program, including: (1) benefits of 
any size can be transferred to the PBGC; (2) periodic active searches 
by the PBGC increase the likelihood of connecting missing participants 
with their benefits; (3) benefits are not diminished by ongoing 
maintenance fees or distribution charges; (4) transferred amounts grow 
with interest (at the applicable Federal mid-term rate); (5) transfers 
to the PBGC Program result in the deferral of income tax, avoid the 20 
percent mandatory withholding, avoid any 10 percent additional tax, and 
grow on a tax deferred basis, and (6) lifetime income options are 
available for balance transfers that are non-de minimis ($7,000 after 
December 31, 2023). As stated in the preamble to the PBGC's final rule 
adopting the PBGC Program, the Department intended to look into what 
changes are needed to its safe harbor regulation (29 CFR 2550.404a-3) 
so that transfers to the PBGC by terminating individual account plans 
would be eligible for relief under the safe harbor.\36\ Thereafter, in 
FAB 2021-01, the Department announced a temporary enforcement policy 
under which it will not pursue violations under section 404(a) of ERISA 
against either responsible plan fiduciaries of terminating defined 
contribution plans or QTAs of abandoned plans in connection with the 
transfer of a missing or non-responsive participant's or beneficiary's 
account balance to the

[[Page 43648]]

PBGC in accordance with the PBGC Program rather than to an IRA, certain 
bank accounts, or to a State unclaimed property fund, as specified in 
29 CFR 2550.404a-3. Such plan fiduciaries and QTAs must comply with the 
guidance in the FAB and act in accordance with a good faith, reasonable 
interpretation of section 404 of ERISA with respect to matters not 
specifically addressed in the FAB. As noted above, the Department is 
continuing the temporary enforcement policy under these interim final 
rules and is specifically interested in stakeholder views on whether 
the PBGC Program should be formally incorporated into the Department's 
regulation at 29 CFR 2550.404a-3 as an alternative to other available 
distribution options for missing or non-responsive participants and 
beneficiaries or perhaps as a replacement for plans that meet the 
requirements of the PBGC Program for all other distribution options for 
such persons. The goal of the change would be to give missing 
participants a better chance than under other distribution options of 
being reunited with their retirement savings. For example, the PBGC 
Program would establish a known, centralized repository that would 
preserve a participant's account balance and, where the account exceeds 
certain threshold amounts ($7,000 after December 31, 2023), permit 
missing participants to elect distribution in the form of an annuity to 
ensure lifetime income as well as in a lump sum. The PBGC Program also 
could reduce administrative burdens in particular on abandoned defined 
contribution plans, especially with respect to small accounts, accounts 
of deceased participants, and accounts subject to the Internal Revenue 
Code's joint and survivor annuity rules.
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    \36\ 82 FR 60800. Previously, the PBGC Program covered only the 
PBGC-insured single-employer defined benefit plans as part of the 
standard termination process. The PBGC Program was expanded to cover 
defined contribution plans (e.g., 401(k) plans), and certain other 
defined benefit plans that terminate on or after January 1, 2018.
---------------------------------------------------------------------------

    To the extent commenters support the transfer of the accounts of 
missing and non-responsive participants to the PBGC under the Abandoned 
Plan Program, the Department is interested in comments addressing 
additional changes to 29 CFR 2578.1 that would facilitate such 
transfers. For example, should the Department consider modifying the 
definition of a QTA to allow third party administrators (TPAs) or other 
entities that do not currently satisfy paragraph (g) of 29 CFR 2578.1 
to act as a QTA solely for the purposes of winding up an abandoned plan 
by transferring all of the accounts of missing and non-responsive 
participants to the PBGC? \37\ If so, what conditions should be imposed 
on TPAs or other entities? For example, should the TPA or other entity 
be required to demonstrate in the notice of intent to serve as QTA that 
it has the authority under existing documentation to direct the 
custodian to pay distributions to participants and beneficiaries?
---------------------------------------------------------------------------

    \37\ Paragraph (g) defines a qualified termination administrator 
as an entity that (1) 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) holds assets of 
the plan that is found abandoned pursuant to paragraph (b).
---------------------------------------------------------------------------

    Fifth, to the extent commenters do not support replacing all the 
current distribution options under 29 CFR 2550.404a-3 with the PBGC 
Program, the Department is interested in comments on whether the 
current Abandoned Plan Program options for distributions to State 
unclaimed property funds should be expanded. The Department has engaged 
over time with a range of stakeholders on issues surrounding missing 
and unresponsive participants, including State unclaimed property 
funds. See, e.g., GAO Report 19-88 ``Federal Action Needed to Clarify 
Tax Treatment of Unclaimed 401(k) Plan Savings Transferred to States 
(January 2019); and Report of the ERISA Advisory Council, ``Voluntary 
Transfers of Uncashed Checks from ERISA Plans to State Unclaimed 
Property Programs'' (November 2019). The ERISA Advisory Council 
concluded that State unclaimed property funds ``have a number of 
features that may decrease the risk of the funds being depleted by 
account fees and increase the likelihood that [m]issing [p]articipants 
will be reunited with their lost retirement savings.'' \38\ Following 
the ERISA Advisory Council report, the National Association of 
Unclaimed Property Administrators \39\ proposed that the Department 
develop a uniform, nationwide regulation for the voluntary transfer to 
unclaimed property funds of uncashed lump sum distribution checks, cash 
outs of $5,000 or less pursuant to Internal Revenue Code Sec.  
411(a)(11), required minimum distributions, and plan mandated lump sum 
distributions at normal retirement age.\40\ The Department is 
interested in comments on the merits of such a limited voluntary option 
being added to the Abandoned Plan Program.\41\
---------------------------------------------------------------------------

    \38\ ERISA Advisory Council Report--Voluntary Transfers of 
Uncashed Checks from ERISA Plans to State Unclaimed Property 
Programs (November 2019) at p. 39.
    \39\ The National Association of Unclaimed Property 
Administrators (NAUPA) is a network of the National Association of 
State Treasurers (NAST) which leads and facilitates collaboration 
among administrators in their efforts to reunite unclaimed property 
with the rightful owner. NAUPA's membership consists of unclaimed 
property administrators representing the governments of all 50 
states, the District of Columbia, the Commonwealth of Puerto Rico, 
U.S. Virgin Islands, several Canadian provinces, and Kenya.
    \40\ The Department has issued opinions and other guidance that 
takes the position that section 514 of ERISA preempts State 
unclaimed property laws that require a plan fiduciary of an ERISA 
employee pension benefit plan to distribute or transfer the accrued 
benefits of a missing participant to the state. Advisory Opinion 94-
41A (Dec. 7, 1994); Advisory Opinion 79-30A (May 14, 1979); Advisory 
Opinion 78-32A (Dec. 22, 1978); Information Letter to Mr. Willis E. 
Sullivan, III Chair, Drafting Committee to Revise Uniform Unclaimed 
Property Act National Conference of Commissioners on Uniform State 
Laws (March 3, 1995).
    \41\ The Department also notes that the SECURE 2.0 Act of 2022 
requires the Department to establish and maintain an online 
searchable database, to be called the Retirement Savings Lost and 
Found, that will, among other things allow individuals to search for 
the contact information of the administrators of certain types of 
retirement plans, with respect to which the individual is or was a 
participant or beneficiary. As it moves forward with the development 
of the Retirement Savings Lost and Found, the Department intends to 
evaluate its impact on the Abandoned Plan Program.
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    Sixth, the Department is interested in whether 29 CFR 2550.404a-3 
should be amended to permit the distribution of Code section 403(b) 
individual annuity contracts and Code section 403(b)(7) individual 
custodial accounts. A terminating Code section 403(b) plan must 
distribute all accumulated benefits to all participants and 
beneficiaries as soon as administratively practicable after termination 
of the plan.\42\ The IRS has addressed terminating 403(b) plans in 
Revenue Ruling 2011-7, 2011-10 IRB 534, including issues related to 
delivery to participants or beneficiaries of a fully paid individual 
annuity contract or an individual certificate evidencing fully paid 
benefits under a group annuity contract. Revenue Ruling 2020-23, 2020-
47 IRB 1028, involved a terminating Code section 403(b) plan with 
403(b)(7) custodial accounts where the plan made in-kind distributions 
of individual custodial accounts (ICAs) to those participants and 
beneficiaries who did not affirmatively elect a distribution or a 
direct rollover to an eligible retirement plan.\43\ The Department is

[[Page 43649]]

interested in comments on whether the Abandoned Plan Program should 
expressly address distribution of an annuity contract or an ICA to a 
missing or non-responsive participant or beneficiary compared to a 
default rollover to an individual retirement plan or a transfer to the 
PBGC in the case of a Code section 403(b) plan with 403(b)(7) custodial 
accounts.\44\ The Department is also seeking comments on whether the 
distribution framework set forth in 29 CFR 2550.404a-3 is consistent 
with Revenue Rulings 2011-7 and 2020-23.
---------------------------------------------------------------------------

    \42\ 26 CFR 1.403(b)-10(a)(1).
    \43\ Section 110 of Division O of the Further Consolidated 
Appropriations Act, 2020, Public Law 116-94, 133 Stat. 2534 (2019) 
known as the Setting Every Community Up for Retirement Enhancement 
Act of 2019 (SECURE Act), directed the Secretary of the Treasury to 
issue guidance providing that the plan administrator or custodian of 
a terminating Code section 403(b) plan with 403(b)(7) custodial 
accounts may distribute an ICA in kind to a participant or 
beneficiary of the plan. Section 110 also provided that the in-kind 
distribution of the ICA would be tax-deferred, similar to the 
treatment of fully paid individual annuity contracts under Rev. Rul. 
2011-7, until amounts are actually paid to the participant or 
beneficiary. Contemporaneous with the publication of Rev. Rul. 2020-
23, the IRS published Notice 2020-80, 2020-47 IRB 1060 requesting 
comments on the application of the annuity and survivor provisions 
of section 205 of ERISA, in connection with in-kind distribution of 
an ICA from a terminating Sec.  403(b) plan.
    \44\ The PBGC Program will accept a transfer from a terminating 
or abandoned Code section 403(b) plan with 403(b)(7) custodial 
accounts, but not from a 403(b) annuity contract plan. See 29 CFR 
4050.201(a)(2) and fn. 8 of the preamble of PBGC's final missing 
participant rule at 82 FR 60800, 60802 (2017).
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    Seventh, the Department is interested in comments on whether 
provisions should be added to the Abandoned Plan Program specifically 
addressing participants in abandoned plans for whom benefits were 
previously forfeited pursuant to Treasury regulation Sec.  1.411(a)-
4(b)(6), because the plan could not locate them. That regulation 
provides that a right to a benefit is not treated as forfeitable 
``merely because the benefit is forfeitable on account of the inability 
to find the participant or beneficiary to whom payment is due, provided 
that the plan provides for reinstatement of the benefit if a claim is 
made by the participant or beneficiary for the forfeited benefit.''

G. Regulatory Impact Analysis

1. Background and Need for Regulatory Action

    As stated earlier in this preamble, this document contains 
amendments to three 2006 regulations that facilitate the termination 
of, and distribution of benefits from, individual account pension plans 
that have been abandoned by their sponsoring employers. The primary 
effect of the amendments is to extend the 2006 regulations to Chapter 7 
ERISA Plans. The amendments also make other minor, unrelated changes to 
the 2006 regulations to include: (1) the elimination of the requirement 
that QTAs 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 (2) conditional permission for 
QTAs to transfer the account balances of certain decedents to an 
appropriate bank account or a state's unclaimed property fund 
regardless of the size of the account balance. The need for the 
amendments is explained in detail above in this preamble, as well as 
the preamble to the 2012 proposal.
    The Department has examined the effects of these amendments as 
required by Executive Order 12866,\45\ Executive Order 13563,\46\ the 
Congressional Review Act,\47\ the Paperwork Reduction Act of 1995,\48\ 
the Regulatory Flexibility Act,\49\ section 202 of the Unfunded 
Mandates Reform Act of 1995,\50\ and Executive Order 13132.\51\
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    \45\ Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993).
    \46\ Improving Regulation and Regulatory Review, 76 FR 3821 
(Jan. 21, 2011).
    \47\ 5 U.S.C. 804(2) (1996).
    \48\ 44 U.S.C. 3506(c)(2)(A) (1995).
    \49\ 5 U.S.C. 601 et seq. (1980).
    \50\ 2 U.S.C. 1501 et seq. (1995).
    \51\ Federalism, 64 FR 43255 (Aug. 10, 1999).
---------------------------------------------------------------------------

2. Executive Orders 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 identified the amendments to the 2006 regulations as 
part of a retrospective regulatory review project consistent with the 
principles of Executive Order 13563. The changes will improve the 
overall efficiency of the program established under the 2006 
regulations, increase its usage, and substantially reduce burdens and 
costs on bankruptcy trustees (or their designees) 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). As amended by Executive Order 
14094 \52\ entitled ``Modernizing Regulatory Review,'' 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 $200 million or more (adjusted every 3 years by the 
Administrator of OIRA for changes in gross domestic product); or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, territorial, or tribal governments 
or communities; (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 legal or policy issues for which centralized 
review would meaningfully further the President's priorities or the 
principles set forth in this Executive order, as specifically 
authorized in a timely manner by the Administrator of OIRA in each 
case. OMB has determined that these amendments are a significant 
regulatory action under section 3(f)(4) of E.O. 12866.
---------------------------------------------------------------------------

    \52\ 88 FR 21879 (April 6, 2023).
---------------------------------------------------------------------------

3. Affected Entities

    The group of entities affected by the amendments consists of 
affected abandoned plans as defined under the 2006 regulations, Chapter 
7 ERISA Plans newly eligible to utilize the abandoned plan rules, and 
the financial firms and bankruptcy trustees who serve as QTAs.
    Based upon Department records it is estimated that approximately 
1,340 plans identify as abandoned plans to the Department each year; 
these plans average approximately 6.4 participants per plan, for a 
total of roughly 8,549 participants (1,340 plans x 6.38 participants 
per plan). The Department assumes this level of utilization will 
continue and uses it as an estimate for the group of plans wound up 
annually under the 2006 regulations.
    The Department used the following information and approach to 
estimate the additional plan load created by the amendments. There are 
three key data points required to estimate the impact of the 
regulations: (1) bankruptcy rates, (2) defined contribution plan 
prevalence (offer rates), and (3) utilization rates.

[[Page 43650]]

The Department assumes that the plan sizes will be similar to that 
experienced under the 2006 regulations; therefore, data regarding the 
offer rates are restricted to smaller establishments (defined as under 
50 employees). Finally, the source for bankruptcy rates, uscourts.gov, 
reports in the aggregate; therefore, the Department's estimates use 
this aggregate rate, which may differ from that of certain subgroups, 
such as smaller firms.
    Data from uscourts.gov for chapter 7 bankruptcies filed between 
2018 and 2022 support an estimate of 12,900 chapter 7 cases being filed 
annually.\53\ Census Bureau data on county business patterns \54\ 
indicate that approximately 75 percent of establishments are small, and 
BLS data \55\ show the Defined Contribution plan offer rate for small 
firms is around 48%. Due to the lack of available data regarding the 
rate of utilization by defined contribution plans during chapter 7 
proceedings, the Department has constructed estimates at 10, 25, and 
100 percent utilization rates. The estimated costs are shown in Table 1 
below.
---------------------------------------------------------------------------

    \53\ A weighted average of the past 5 years data is calculated 
for years 2018-2022 as: (13,906 x 30%) + (13,678 x 25%) + (14,324 x 
20%) + (10,803 x 15%) + (8,131 x 10%) & 12,890. The weights were 
chosen to account for the distortion during the Covid-19 pandemic. 
https://www.uscourts.gov/statistics-reports/analysis-reports/bankruptcy-filings-statistics/bankruptcy-statistics-data.
    \54\ https://data.census.gov/cedsci/table?q=private%20sector%20establishments%20by%20size&tid=CBP2019.CB1900CBP.
    \55\ BLS data accessed 08/22/2022 https://data.bls.gov/cgi-bin/srgate, lesser of series (NBU22000000000000227372 & 
NBU22000000000000127372) for 2021 data.

               Table 1--Summary of Estimated Cost of Amendments at Selected Plan Utilization Rates
----------------------------------------------------------------------------------------------------------------
                                                                  Estimated cost  Estimated cost  Estimated cost
                                                                    change at a     change at a     change at a
                 Component of Interim Final Rule                        10%             25%            100%
                                                                    utilization     utilization     utilization
                                                                       rate            rate            rate
----------------------------------------------------------------------------------------------------------------
Additional Plans................................................             466           1,166           4,662
Additional Participants.........................................           2,973           7,439          29,744
----------------------------------------------------------------------------------------------------------------
Notice to Plan Sponsor (to locate by QTAs)......................  ..............  ..............  ..............
Notice to DOL (on plan abandonment/program utilization).........         $51,088        $127,831        $511,103
Bankrupt Plans (Court Order) (Trustee appt).....................          11,540          28,875         115,451
Notice to Participants..........................................          38,781          97,037         387,980
Final Notice....................................................          14,004          35,040         140,101
Chapter 7 ERISA Plans (Fiduciary Breach) (to DOL as part of                5,938          14,859          59,410
 abandonment notice)............................................
Special Terminal Report (to DOL)................................         187,383         461,591       1,801,906
Safe Harbor.....................................................  ..............  ..............  ..............
Class Exemption Familiarization.................................  ..............  ..............  ..............
                                                                 -----------------------------------------------
                                                                         308,735         765,232       3,015,950
----------------------------------------------------------------------------------------------------------------
Note: Costs include costs for labor and materials & postage where relevant.

    A 10 percent utilization rate yields an estimate of approximately 
1,800 plans and 11,500 participants in total, after the amendment.\56\ 
Using a 100 percent utilization rate results in an estimate of roughly 
6,000 plans with 38,300 participants using the program each year.\57\ 
Using a utilization rate of 25 percent in the calculations, which the 
Department will use as the estimate here, results in approximately 
1,200 additional plans (with roughly 7,500 participants \58\ utilizing 
the Abandoned Plan Program due to the amendments, bringing the 
estimated annual utilization numbers to 2,500 plans with 16,000 
participants).\59\
---------------------------------------------------------------------------

    \56\ 1,800 [ap] 1,806 = [(12,900 CHPT 7) x (48% small plans 
offering DC plans) x (75.3% proportion of small plans) x (10% 
abandonment rate of plans with firms in CHPT 7)] + (1,340 plans 
currently using the program); 11,500 participants [ap] 11,522 = 
1,806 plans x 6.38 participants.
    \57\ 6,000 [ap] 6,002 = [(12,900 CHPT 7) x (48% small plans 
offering DC plans) x (75.3% proportion of small plans)] + (1,340 
plans currently using the program); 38,300 participants [ap] 38,293 
= 6,002 plans x 6.38 participants per plan.
    \58\ 1,200 [ap] 1,166 = (12,900 CHPT 7) x (48% small plans 
offering DC plans) x (75.3% proportion of small plans) x (25% 
abandonment rate of plans with firms in CHPT 7).
    \59\ 2,506 = (1,340 plans currently using the program) + (1,166 
new plans); 16,000 participants [ap] 15,988 = 2,506 plans x 6.38 
participants.
---------------------------------------------------------------------------

    The Department estimates that approximately 1,031 QTAs (including 
bankruptcy trustees) will act to establish user accounts to use the 
online filing system with the Department, which is described in section 
C.7 of this preamble.

4. Benefits

a. Benefits of Expanding Regulations to Chapter 7 ERISA Plans
    The amendments to the 2006 regulations provide critical guidance 
that will encourage the orderly and efficient termination of Chapter 7 
ERISA 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 
amendments, some bankruptcy trustees may lack the necessary guidance to 
properly terminate Chapter 7 ERISA Plans and distribute benefits to 
participants and beneficiaries. Specifically, the amendments clarify 
the bankruptcy trustee's (or, as applicable, the eligible designee's) 
obligations as QTA 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 QTAs will 
lead to administrative cost savings for bankruptcy trustees who choose 
to use these interim final rules. The Department has not quantified 
these benefits because it does not have sufficient information 
regarding the characteristics of Chapter 7 ERISA Plans. The Department 
expects that bankruptcy trustees will decide to use the termination and 
winding up procedures in the interim final rules based on their 
individual assessment of whether it would be more cost effective to 
terminate a plan under or outside of the regulatory safe harbors.
    One of the potential administrative cost savings that would result 
from the amendments is that Chapter 7 ERISA Plans would file one 
streamlined

[[Page 43651]]

termination report at the end of the winding up process in lieu of 
filing Form 5500 Annual Return/Reports. Additionally, Chapter 7 ERISA 
Plans that are not eligible for the small plan audit waiver of 29 CFR 
2520.104-46 (generally, plans with fewer than 100 participants) would 
avoid incurring costly audit fees that otherwise would diminish plan 
assets.
    Other benefits of the amendments include enhancements to retirement 
security of individuals in Chapter 7 ERISA Plans because of the 
requirements that QTAs, with certain exceptions: (1) take reasonable 
steps to collect 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 delinquent contributions (employer and employee) owed to the 
plan, and any activity believed to be evidence of other fiduciary 
breaches by a prior plan fiduciary that involve plan assets.
    Removing barriers to winding down the plans may result in 
preserving the value of, and hastening access to, the participants' 
assets. A potential benefit is the reduction of the likelihood of 
becoming a missing participant. As time passes, record accuracy can 
degrade as former employees move. In these instances, funds may be 
transferred into a low yielding account meant to preserve the assets. 
By preventing the employee from becoming a missing participant and 
giving them access to their funds, plan participants can invest the 
assets according to their risk tolerances. Each of these benefits 
affect the value of the participants' assets in a positive manner.
b. Benefits of Other Amendments to the 2006 Regulations
    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 
QTAs) of terminated individual account plans can directly transfer a 
missing or non-responsive participant's account balance directly to 
appropriate 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 in cases where 
certain conditions are satisfied. As stated above in this preamble, 
Sec.  2550.404a-3 is being amended to conditionally permit QTAs to 
transfer the account balances of certain decedents to an appropriate 
bank account or a state's unclaimed property fund, regardless of the 
size of the account balance. The amendments would remove an obstacle to 
greater usage of the Abandoned Plan Program by eliminating the need to 
establish individual retirement plans for the account balances of known 
deceased participants with no known, living named beneficiary that are 
over $1,000 when it is unlikely that anyone will claim the funds in 
such plans.
c. 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 statement of past or present investigations in the notice of 
plan abandonment from the QTA to the Department (see Sec.  
2578.1(c)(3)(i)(B)). The Department believes that, at present, this 
statement is unnecessary and may even discourage firms to serve as 
QTAs, undermining the use of the Abandoned Plan Program. The Department 
holds this belief because EBSA's Office of Enforcement is easily able 
to run searches to determine whether potential QTAs are under 
investigation by the Department. By encouraging more potential QTAs to 
wind up abandoned plans in accordance with the Abandoned Plan Program 
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.

5. Costs

    The Department estimates that the cost associated with these 
interim final rules, at a 25 percent utilization rate by firms in 
bankruptcy would total approximately $765,232, as shown in Table 1 
above. These costs would result from the estimated 1,166 Chapter 7 
ERISA Plans that decide to use the termination and winding up 
procedures in the interim final rules and the estimated 1,031 QTAs 
(including bankruptcy trustees) that choose to create accounts with the 
Department's online filing system in order to file their STRAPs 
electronically. These costs are quantified and discussed in more detail 
in the Paperwork Reduction Act section, below.

6. Cost Savings

    As discussed above, the costs associated with these interim final 
rules total approximately $870,059. Participation in the Abandoned Plan 
Program is burden reducing in that it relieves participating plans from 
their obligation to comply with Form 5500 Annual Reporting requirements 
and Summary Annual Report requirements for the period of bankruptcy 
and/or program utilization.
    The Department estimates that the average period of bankruptcy 
proceedings for Chapter 7 ERISA Plans is 2.5 years. Therefore, absent 
the Abandoned Plan Program, the 1,166 Chapter 7 ERISA Plans estimated 
to participate in the Abandoned Plan Program each year would be 
obligated to file an average of 3.5 Form 5500-SFs and 3.5 accompanying 
Summary Annual Reports--one Form 5500-SF filing and accompany Summary 
Annual Report for each year the Chapter 7 ERISA Plan was in bankruptcy 
proceedings and/or abandoned, and one terminal Form 5500-SF filing and 
accompanying Summary Annual Report.\60\ These Chapter 7 ERISA Plans 
would each also need to apply for an EFAST2 credential in order to 
electronically file Form 5500-SFs.\61\
---------------------------------------------------------------------------

    \60\ The Department notes that this figure is an average for 
burden calculation purposes. A relatively equal number of plans 
would file three and four Form 5500-SFs and accompanying Summary 
Annual Reports.
    \61\ EFAST2 credentials are issued on an individual basis and 
are valid indefinitely unless a period of three calendar years 
passes without use. The Department assigns the cost of 
credentialling to each case to provide a conservative estimate. It 
constitutes roughly 7 percent of the total cost of filing per plan.
---------------------------------------------------------------------------

    The Department estimates that the approximate cost per plan to file 
a Form 5500-SF is $302, the cost for similarly sized plans to create 
and distribute a Summary Annual Report is approximately $87, and the 
cost to apply for an EFAST2 credential is approximately $39.\62\ 
Therefore, the total cost savings in Form 5500 filing relief is 
$1,234,391 (1,166 Chapter 7 ERISA Plans x 3.5 Form 5500-SF filings x 
$302), the total cost savings in Summary Annual Report requirements 
relief is $355,326 (1,166 Chapter 7 ERISA Plans x 3.5 Summary Annual 
Reports x $87), and the total cost savings from not having to apply for 
EFAST2 credentials is $45,575 (1,166 plans x $39).\63\
---------------------------------------------------------------------------

    \62\ Estimates are based on time estimates in supporting 
statements which are available at reginfo.gov associated with 
control numbers 1210-0040 and 1210-0110 and wage rate estimates 
maintained by EBSA. For a description of the Department's 
methodology for calculating wage rates, see https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-july-2017.pdf.
    \63\ Totals differ due to rounding.

---------------------------------------------------------------------------

[[Page 43652]]

    The total cost savings is $1,635,292 ($1,234,391 + $355,326 + 
$45,575). When compared against the $765,232 in new costs for Chapter 7 
ERISA Plans, the net cost savings resulting from this expansion of the 
Abandoned Plan Program is $870,059 annually.

H. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 
U.S.C. 3506(c)(2)(A)), the Department solicited comments concerning the 
information collection requirements (ICRs) included in the December 12, 
2012 proposed amendments to the 2006 regulations at 77 FR 74063 and the 
proposed amendments to the class exemption PTE 2006-06 at 77 FR 74055. 
At the same time, the Department also submitted the ICR to OMB in 
accordance with 44 U.S.C. 3507(d). The Department received seven 
comments on the proposal. One commenter raised several questions about 
the model notices associated with 29 CFR 2578.1. The Department 
responded to the commenter, including by making some changes to the 
model notices, as discussed above in section C.7. of the preamble. 
Another commenter suggested that in the context of the potential 
expansion of the program to include FDIC receivers, the FDIC receiver 
should not be required to review ERISA section 408(b)(2) notices and 
prepare and distribute ERISA section 404(a)(5) notices detailing fees 
and costs for a plan that is being terminated. As the Department did 
not expand the program to include FDIC receivers as part of these 
interim final rules, this comment was not addressed.
    The changes made by these interim final rules affect the existing 
OMB Control Number 1210-0127. A copy of the ICR for OMB Control Number 
1210-0127 may be obtained by contacting the PRA addressee listed in the 
following sentence or at www.RegInfo.gov. For additional information, 
contact: James Butikofer, Office of Research and Analysis, U.S. 
Department of Labor, Employee Benefits Security Administration, 200 
Constitution Avenue NW, Room N-5718, Washington, DC 20210; or 
[email protected]. The OMB will consider all comments that they receive 
on or before June 17, 2024. Comments and recommendations for the 
information collection should be sent within 30 days of publication of 
this notice to www.reginfo.gov/public/do/PRAMain. Find this particular 
information collection by selecting ``Currently under 30-day Review--
Open for Public Comments'' or by using the search function.
    The Department assumes that most of the tasks that will be 
undertaken by QTAs to terminate and wind up plans 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 interim final rules require QTAs to furnish a series of notices 
and a report in the process of terminating and winding up plans. For 
instance, before winding up a plan, the QTA (other than the QTA of a 
Chapter 7 ERISA 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 QTA's finding of abandonment, or 
when there is an entry of an order for relief for a Chapter 7 ERISA 
Plan, the QTA must file with the Department a notice of plan 
abandonment that contains core information about the plan and the 
person electing to be the QTA. The QTA then must furnish to each 
participant or beneficiary a notice with information about the 
termination, the person's account balance, and requesting that such 
person elect a form of distribution. Upon terminating and distributing 
the assets of the plan, the QTA must file a final notice to the 
Department stating that the plan has been terminated and all the plan's 
assets have been distributed. In conjunction with the final notice, the 
QTA must file the Special Terminal Report for Abandoned Plans (STRAP) 
in accordance with instructions published by the Department. The STRAP 
may be filed electronically using the Department's online filing system 
when it becomes available. If a QTA chooses to use the online filing 
system, the QTA will be required to create an account with the 
Department. The Department estimates the burden of these notices and 
reports as a cost burden to the plan because the QTA uses plan assets 
to pay for the notices and STRAP. The only burden reported as hour 
burden is the burden incurred by plan administrators themselves for 
compliance with the safe harbor for non-abandoned plans, which are 
information collection requests (ICRs) subject to the PRA. The hour and 
cost burden associated with these ICRs are summarized in Table 2 below.

                                                            Table 2--PRA Hour and Cost Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Incremental     Incremental
                                                            cost burden    hours burden     Cost burden    Hours burden
             Component of interim final rule                associated      associated      associated      associated      Total cost      Total hours
                                                               with            with        with existing   with existing      burden          burden
                                                            amendments      amendments      regulations     regulations
                                                                     (a)             (b)             (c)             (d)         (a + c)         (b + d)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice to Plan Sponsor (to locate by QTAs)..............              $0               0          $8,442             335          $8,442             335
Notice to DOL (on plan abandonment/plan utilization)....               0           1,360               0           1,563               0           2,924
Chapter 7 ERISA Plans (Court Order) (Trustee appt)......               0             292               0               0               0             292
Notice to Participants..................................          47,238             539          54,287             620         101,526           1,159
Final Notice............................................               0             389               0             447               0             835
Chapter 7 ERISA Plans (Fiduciary Breach) (to DOL as part               0             136               0               0               0             136
 of abandonment notice).................................
Special Terminal Report (to DOL)........................               0           3,949               0           4,539               0           8,488
Safe Harbor.............................................               0               0          44,816          42,026          44,816          42,026
Class Exemption Familiarization.........................               0             583               0             670               0           1,253
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................          47,238           7,248         107,545          50,200         154,783          57,449
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Cost burdens include costs for materials and postage where relevant.


[[Page 43653]]

1. Notice to Plan Sponsor

    This provision only applies to plans that are not Chapter 7 ERISA 
Plans therefore the changes to this component are caused by updating 
inputs and not by any changes to the rule. The Department estimates 
that for each of these estimated 1,340 plans, a QTA would require 10 
minutes of clerical staff time at an hourly labor rate of $63.45 to 
complete the information on the plan sponsor notice, and five minutes 
of an accountant's time at an hourly labor rate of $116.86 to review 
and sign the notice.\64\ This results in approximately 223 hours of 
clerical staff time with an associated cost burden of $14,171 (223 
hours x $63.45 per hour) and 112 hours of an accountant's time with an 
associated cost burden of $13,049 (112 hours x $116.86 per hour).\65\
---------------------------------------------------------------------------

    \64\ For a description of the Department's methodology for 
calculating wage rates, see https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/rules-and-regulations/technical-appendices/labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-july-2017.pdf.
    \65\ Burden estimates presented in the text are rounded to the 
nearest hour; however, in calculating equivalent costs, unrounded 
burden estimates are used.
---------------------------------------------------------------------------

    These notices are sent by a method requiring acknowledgement of 
receipt. Therefore, mailing costs include $6.25 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 $8,442 for the 1,340 notices 
(1,340 notices x ($6.25/notice + $0.05/notice)). These components 
result in a total estimated cost associated with the 2006 regulations 
notices to plan sponsors of $35,662.

2. Notice of Plan Abandonment to the Department

    The Department estimates that for each of the estimated 2,506 plans 
participating in the Abandoned Plan Program (1,340 non-Chapter 7 ERISA 
Plans and 1,166 Chapter 7 ERISA Plans), a QTA may utilize 30 minutes of 
a clerical worker's time at an hourly rate of $63.45 to fill in the 
needed information on the notice. The Department also assumes that 40 
minutes of an accountant's time with an hourly rate of $116.86 will be 
required to prepare required plan information, and to review and sign 
the forms. This results in about 1,253 hours (2,506 plans x 30 minutes) 
of clerical staff time with an equivalent cost burden of $79,503 (1,253 
hours x $63.45 per hour), and 1,671 hours (2,506 plans x 40 minutes) of 
an accountant's time with an equivalent cost burden of $195,234 (1,671 
hours x $116.86 per hour) for a total estimated equivalent cost burden 
of $274,737. Based upon recent filing trends between QTAs and the 
Department, 100 percent of plans are expected to furnish the 
information electronically at de minimis cost.

3. Bankruptcy Trustee's Appointment--Chapter 7 ERISA Plans

    For an estimated 1,166 Chapter 7 ERISA Plans, an additional cost 
would be incurred for the QTA to attach to the notice of plan 
abandonment a copy of the order entered in the case reflecting the 
bankruptcy trustee's appointment to administer the case. The Department 
estimates that it will take 10 minutes of an accountant's time to 
prepare the required statement and collect required documents and five 
minutes of clerical time to make required copies. This is expected to 
impose an additional burden of approximately 194 hours (1,166 plans x 
10 minutes) for accountants with an equivalent cost of $22,710 (194 
hours x $116.86 per hour). For the clerical professionals, the burden 
is estimated at 97 hours (1,166 plans x 5 minutes) with an equivalent 
cost of $6,165 (97 hours x $63.45 per hour). This results in a labor 
cost of approximately $28,875 to produce the notice of bankruptcy 
trustee's appointment.
    The rule requires the order entered in the case reflecting the 
bankruptcy trustee's appointment to be included with the notice of plan 
abandonment. Based upon recent filing trends between QTAs and the 
Department, 100 percent of plans are expected to furnish the 
information electronically at de minimis cost.

4. Notice to Participants and Beneficiaries

    Data provided by EBSA's Office of Enforcement show that the average 
abandoned plan contains 6.38 participants. As stated previously, the 
Department estimates that approximately 1,340 abandoned plans will 
apply each year. This covers approximately 8,549 participants (1,340 
plans x 6.38 participants per plan). In light of the expansion of the 
2006 regulations to cover plans of sponsors in chapter 7 liquidation, 
the Department estimates that there will be a roughly 90 percent 
increase in applications, bringing the total number of filings up to 
2,506.\66\ Assuming that Chapter 7 ERISA Plans have roughly the same 
number of participants as abandoned plans, the total number of 
participants affected would be approximately 15,988 (2,506 plans x 6.38 
participants per plan).
---------------------------------------------------------------------------

    \66\ The estimation of additional plans is explained in detail 
in Section 3 Affected Plans of this document.
---------------------------------------------------------------------------

    The Department estimates that for each of the estimated 2,506 
terminating plans, a QTA will utilize 15 minutes of an accountant or 
similar professional's time to prepare and review the plan's notices to 
participants and beneficiaries. Clerical staff will spend two minutes 
per participant preparing and mailing the notices. This results in 
approximately 533 hours (2,506 plans x 6.38 participants per plan x 2 
minutes per participant) of clerical staff time with an equivalent cost 
of $33,815 (533 hours x $63.45 per hour) and 627 hours (2,506 plans x 
15 minutes per plan) of an accountant or similar professional's time 
with an associated cost burden of approximately $73,213 (627 hours x 
$116.86 per hour). This results in an estimated cost of approximately 
$107,028 for labor to produce the notices to participants and 
beneficiaries.
    The Department estimates that this notice, on average, is two pages 
and must be furnished to the last known address of each participant or 
beneficiary. The Department received comments in response to the 2012 
proposal suggesting that postage cost estimates for this component 
should reflect certified mail. The Department has increased its 
estimates of the postage costs accordingly but is also seeking comments 
above on the use of certified mail. The mailing and material costs for 
paper notices are estimated to be $6.35 per mailing (2 pages x $.05 per 
page + $6.25 postage). The Department estimates that 15,988 
participants (2,506 plans x 6.38 participants per plan) will receive 
the notice by mail, creating a mailing cost burden of $101,526. 
Combining this cost with the labor to produce the notices, the total 
cost is estimated at approximately $208,554.

5. Final Notice

    The Department estimates that for each of the estimated 2,506 
terminating plans, a QTA will utilize 10 minutes of an accountant's 
time to review the forms in the Final Notice to the Department. 
Clerical staff will spend, on average, 10 minutes per plan preparing 
and mailing the notices. This results in about 418 hours (2,506 plans x 
10 minutes) of clerical staff time with an equivalent cost of $26,501 
(418 hours x $63.45 per hour) and 418 hours of an accountant's time 
(2,506 plans x 10 minutes) with an equivalent cost of $48,809 (418 
hours x $116.86 per hour). This results in an estimated labor cost of 
approximately $75,309 to produce the Final Notices.

[[Page 43654]]

Based upon recent filing trends between QTAs and the Department, 100 
percent of plans are expected to furnish the information electronically 
at de minimis cost.

6. Reporting Requirement for Prior Plan Fiduciary Breaches

    As discussed earlier in this preamble, the amendments would require 
QTAs of Chapter 7 ERISA Plans (whether they are bankruptcy trustees or 
eligible designees) to report to the Department delinquent 
contributions (employer and employee) owed to the plan, and any 
activity that the QTA believes may be evidence of other fiduciary 
breaches by a prior plan fiduciary that involve plan assets. When 
applicable, this information must be reported in conjunction with the 
filing of the Final Notice or Notice of Plan Abandonment. If, after the 
completion of 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 must report 
such activity to the Department in a time and manner specified in 
instructions developed by the Department.
    While the Department has no basis for estimating the percentage of 
arrangements that will be subject to each of these reporting 
provisions, the Department assumes for purposes of this analysis that a 
report will be required for 20 percent of Chapter 7 ERISA Plans. Thus, 
given an estimated 1,166 Chapter 7 ERISA Plans, the Department 
estimates that 233 plans will need to report such information. The 
Department anticipates that 30 minutes of a financial professional's 
time and five minutes of clerical time will be required to prepare and 
process the information. The Department therefore estimates that the 
burden for plans will be approximately 117 hours of an accountant's 
time (233 plans x 30 minutes) at an equivalent cost of $13,626 (233 
hours x $116.86 per hour) and 19 hours of clerical time (233 plans x 5 
minutes) at an equivalent cost of $1,233 (19 hours x $63.45 per hour). 
This results in an estimated labor cost of approximately $14,859 to 
produce and distribute notices of fiduciary breaches to the Department.
    The Department assumes that the reporting of this information will 
be made with the Notice of Plan Abandonment or Final Notice; based upon 
recent filing trends between QTAs and the Department, 100 percent of 
plans are expected to furnish the information electronically at de 
minimis cost.

7. Special Terminal Report for Abandoned Plans (29 CFR 2520.103-13)

    The Department estimates that it will take plans 3.25 hours to file 
the STRAP in accordance with the instructions on the Department's 
website. It is assumed that an accounting professional working at a 
cost of $116.86 per hour will perform this task resulting in a burden 
of 8,145 hours (2,506 plans x 3.25 hours) and an equivalent cost of 
$951,766 (8,145 hours x $116.86 per hour).
    The Department assumes all STRAPs will be submitted electronically 
once the Department's online filing system becomes available. To 
achieve this, QTAs (including bankruptcy trustees) will need to set up 
user accounts the first time they serve as a QTA and use the 
Department's new online submission system. The Department estimates 
that 1,031 QTAs (including bankruptcy trustees) will set up user 
accounts each year. It is assumed that a compensation and benefits 
professional will take 20 minutes to complete this task resulting in a 
burden of 344 hours (1,031 QTAs x 20 minutes) and an equivalent cost of 
$40,298 (344 hours x $117.26 per hour). Combining these figures results 
an estimated labor cost of $992,065 to prepare and submit the STRAPs.

8. 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 
1,136,306 participants and beneficiaries will receive notices from 
24,897 plan sponsors. The Department estimates that a benefits manager 
will spend approximately 10 minutes per plan preparing the notices. 
This results in 4,150 hours of benefits manager burden (24,897 plans x 
10 minutes) at an equivalent cost of $559,892 (4,150 hours x $134.93 
per hour). Clerical professionals will spend, on average, two minutes 
per notice preparing and distributing the 1,136,306 notices. This 
results in 37,877 hours of clerical burden (1,136,306 notices x 2 
minutes) at an equivalent cost of $2,403,287 (37,877 hours x $63.45 per 
hour). It is assumed that 5.8 percent of participants will receive the 
notice by first class mail and 94.2 percent will receive the notice 
electronically at de minimis cost. The Department estimates that 
mailing the notices will produce a cost burden of $44,816 (1,136,306 
participants x 5.8 percent receiving mailed notices) x ($0.63 for 
postage + ($0.05 per page x 1 page)).\67\ Thus, the notice required 
under the Safe Harbor for Distributions from Terminated Individual 
Account Plans produces a total hour burden of 42,026 hours at an 
equivalent cost of $2,963,179 and a total cost burden of $44,816 for 
materials and postage. These costs are borne by non-Abandoned Plans and 
are not attributable to the amendments expanding the 2006 regulations 
to Chapter 7 ERISA Plans.
---------------------------------------------------------------------------

    \67\ The Department estimates approximately 94.2% of 
participants receive disclosures electronically under the combined 
effects of the 2002 electronic disclosures safe harbor and the 2020 
electronic safe harbor. The Department estimates that 58.2% of 
participants will receive electronic disclosures under the 2002 safe 
harbor. According to the National Telecommunications and Information 
Agency (NTIA), 40.0% of individuals age 25 and over have access to 
the internet at work. According to a Greenwald & Associates survey, 
84.0% of plan participants find it acceptable to make electronic 
delivery the default option, which is used as the proxy for the 
number of participants who will not opt-out of electronic disclosure 
that are automatically enrolled (for a total of 33.6% receiving 
electronic disclosure at work). Additionally, the NTIA reports that 
40.4% of individuals age 25 and over have access to the internet 
outside of work. According to a Pew Research Center survey, 61.0% of 
internet users use online banking, which is used as the proxy for 
the number of internet users who will affirmatively consent to 
receiving electronic disclosures (for a total of 24.7% receiving 
electronic disclosure outside of work). Combining the 33.6% who 
receive electronic disclosure at work with the 24.7% who receive 
electronic disclosure outside of work produces a total of 58.2%. The 
remaining 41.8% of participants are subject to the 2020 safe harbor. 
According to the 2019 American Community Survey, 86.6% of the 
population has an internet subscription. The Department estimates 
that 0.5% of electronic disclosures will bounce back and will need 
to be sent a paper disclosure. Accordingly, for the 41.8% of 
participants not affected by the 2002 safe harbor, 86.1%, or an 
additional 36.0% (41.8% x 86.1%), are estimated to receive 
electronic disclosures under the 2020 safe harbor. In total, the 
Department estimates that 94.2% (58.2% + 36.0%) would receive 
electronic disclosures.
---------------------------------------------------------------------------

9. Abandoned Plan Class Exemption, PTE 2006-06

    PTE 2006-06 permits a QTA 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

[[Page 43655]]

a QTA to: (1) designate itself or an affiliate as a provider of an 
individual retirement plan or other account; (2) 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 (3) 
pay itself or its affiliate in connection with the rollover.
    Currently, PTE 2006-06 and the accompanying Abandoned Plan Program 
regulations do not cover plans of sponsors involved in chapter 7 
bankruptcy proceedings. In this regard, bankruptcy trustees do not meet 
the definition of QTA as set forth in the existing Abandoned Plan 
Program regulations and the class exemption. The amendments expand the 
definition of QTA to include bankruptcy trustees and certain persons 
designated by them to act as QTAs in terminating and winding up the 
affairs of abandoned plans. The Department believes that the amendments 
to the Abandoned Plan Program regulations and PTE 2006-06 will 
incentivize many bankruptcy trustees to carry out 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 amendments to the Abandoned Plan Program 
regulations is a condition of the amendment to the class exemption; 
therefore, the costs and benefits that would be associated with 
complying with the amendment to the class exemption have been described 
and quantified in connection with the economic impact of the regulatory 
amendments. In its current form, PTE 2006-06 requires, among other 
things, that fees and expenses paid to the QTA 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 QTA (or affiliate) for the same or 
similar services provided to customers that are not plans terminated 
pursuant to the Abandoned Plan Program regulations, if the QTA (or 
affiliate) provides the same or similar services to such other 
customers. The amended class exemption provides an exception for 
services provided in connection with the duty to collect delinquent 
contributions on behalf of the plan. The exception judges what is 
reasonable in light of industry rates ordinarily charged by firms or 
individuals representing or assisting a bankruptcy trustee in 
performing similar collection services on behalf of an estate in a 
chapter 7 proceeding. The class exemption, in its current form, also 
requires that QTAs 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 form. Accordingly, the recordkeeping burden attributable to the 
amendment will be handled by the QTA 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 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 all QTAs will take advantage of 
the exemption, the hour burden attributable to supervisory duties for 
QTAs of abandoned plans (including familiarization costs for new QTAs) 
is expected to be one half hour for each QTA, or 1,253 hours (2,506 
plans x 30 minutes). Assuming a financial manager's wage rate of 
$190.63 per hour, this supervisory cost is expected to total $238,859 
($190.63 per hour x 1,253 hours).
    Also, in certain limited circumstances, the current exemption PTE 
2006-06 requires QTAs to provide the Department with a statement under 
penalty of perjury that services were performed and a copy of the 
executed contract between the QTA 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.
    Below is a summary of the burden:
    Type of Review: 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: 28,434.
    Responses: 1,162,551.
    Frequency of Response: One time.
    Estimated Total Burden Hours: 42,026.
    Cost Burden: $2,963,179.

I. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) applies 
to most 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.). Unless an agency certifies that such a rule will 
not have a significant economic impact on a substantial number of small 
entities, section 603 of the RFA requires the agency to present a final 
regulatory flexibility analysis at the time of the publication of the 
rulemaking describing the impact of the rule on small entities. Small 
entities include small businesses, organizations, and governmental 
jurisdictions. For purposes of analysis under the RFA, the Department 
considers a small entity to be an employee benefit plan with fewer than 
100 participants.\68\ The basis of this definition is found in section 
104(a)(3) of ERISA, which permits the Secretary of Labor to prescribe 
simplified annual reports for welfare benefit plans that cover fewer 
than 100 participants. While some large employers may have small plans, 
in general, small employers maintain most small plans. Thus, the 
Department believes that assessing the impact of these final 
regulations 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 that 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.). The Department requested comments 
on the appropriateness of this size standard at the proposed rule stage 
and received no adverse responses.
---------------------------------------------------------------------------

    \68\ The Departments consulted with the Small Business 
Administration Office of Advocacy in making this determination, as 
required by 5 U.S.C. 603(c) and 13 CFR 121.903(c) in a memo dated 
June 4, 2020.
---------------------------------------------------------------------------

    The Abandoned Plan Program is a voluntary program intended to 
provide a cost effective, streamlined option for winding up abandoned 
plans. The Department believes that these amendments will expand usage 
of the Abandoned Plan Program and help to preserve the assets of 
Chapter 7 ERISA

[[Page 43656]]

Plans, thereby maximizing benefits ultimately payable to participants 
and beneficiaries and improving economic efficiency.
    Essentially all abandoned plans are assumed to be small plans. 
Therefore, the more detailed discussion earlier in the preamble on the 
costs of the amendments is applicable to this analysis of costs under 
the RFA. As discussed previously in the RIA section, the costs 
associated with the amendments to the Abandoned Plan Program total 
approximately $765,232 and affect approximately 1,166 plans in a given 
year. This is an average of $656.29 per plan. This cost is net of the 
savings described in section 6 above, which are expected to be roughly 
$1,400 per plan attributable to the STRAP replacing multiple years of 
reporting requirements.
    The most recent Private Pension Plan Bulletin estimates that there 
were 257,699 plans with less than 10 participants in 2020, which is the 
size group most consistent with historical utilization trends. 
Comparing this group with the estimated 1,166 plans that may use the 
program annually indicates that they represent less than 0.5 percent of 
very small defined contribution plans which is not a substantial number 
of the small plans affected.\69\
    The Department also examined the costs relative to the participant 
asset balances in the group of plans assumed to be most likely to 
utilize the program. For a participant in the smallest plans measured 
by the number of participants and average per participant account 
balance, the roughly $103 per participant cost represents, on average, 
a 2.4 percent reduction in their account balance, which is not a 
significant impact. The distributions of participant account balance 
reductions are presented in Table 3 below, by plan size, for all small 
plans.

                                                        Table 3--Cost as a Percentage of Balance
                                                                    [Per participant]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               10th            25th                                            75th            90th
                        Plan size                           percentile      percentile        Median           Mean         percentile      percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
0-9.....................................................            2.37            0.51            0.14            0.06            0.05            0.02
10-19...................................................            2.18            0.59            0.20            0.11            0.08            0.04
20--29..................................................            2.18            0.63            0.23            0.13            0.10            0.06
30--39..................................................            2.26            0.66            0.25            0.14            0.11            0.06
40--49..................................................            2.16            0.66            0.26            0.15            0.12            0.07
50--59..................................................            2.13            0.66            0.27            0.16            0.13            0.07
60--69..................................................            2.09            0.67            0.27            0.17            0.13            0.07
70--79..................................................            2.13            0.69            0.28            0.17            0.14            0.07
80--89..................................................            2.06            0.68            0.28            0.17            0.14            0.08
90--99..................................................            1.91            0.66            0.28            0.17            0.14            0.07
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: 2020 Private Pension Plan Bulletin Research File, EBSA.
Notes: Excludes plans reporting no assets and no participants.

    Due to the small number of small plans involved and relatively low 
cost per plan and participant, the Assistant Secretary of the Employee 
Benefit Security Administration hereby certifies under 5 U.S.C. 605 
that this rule will not have a significant economic impact on a 
substantial number of small entities
---------------------------------------------------------------------------

    \69\ Employee Benefits Security Administration, Private Pension 
Plan Bulletin: Abstract of 2020, Table B1, (2022).
---------------------------------------------------------------------------

J. Congressional Review Act

    This 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 will be transmitted to the Congress and 
the Comptroller General for review. The interim final rule is not a 
``major rule'' as that term is defined in 5 U.S.C. 804, because it is 
not likely to result in (1) an annual effect on the economy of $100 
million or more; (2) a major increase in costs or prices for consumers, 
individual industries, or Federal, State, or local government agencies, 
or geographic regions; or (3) significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.

K. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), the 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 the private sector of more than $100 million, adjusted 
for inflation.

L. 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 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 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.

[[Page 43657]]

29 CFR Part 2578

    Employee benefit plans, Pensions, Retirement.

    For the reasons set forth in the preamble, the Department of Labor 
amends 29 CFR chapter XXV as follows:

PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE

0
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. 2520.101-5 also 
issued under 29 U.S.C. 1021(f). Sec. 2520.101-6 also issued under 29 
U.S.C. 1021(k). Sec. 2520.103-13 also issued under 29 U.S.C. 1023. 
Secs. 2520.102-3, 2520.104b-1, 2520.104b-3, and 2520.104b-31 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.

0
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 be in the form published by 
the Department in the Abandoned Plans section of the Employee Benefits 
Security Administration's website and shall contain the information 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 the following information in accordance with 
the instructions to the terminal report published by the Department in 
the Abandoned Plans section of the Employee Benefits Security 
Administration's website:
    (1) Identification information concerning the plan, the qualified 
termination administrator, and, if applicable, the bankruptcy trustee.
    (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 an 
identification of 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.
    (6) The total number of distributions.
    (7) The number of distributions to missing participants included in 
the total number of distributions reported in paragraph (b)(6) of this 
section.
    (8) A statement that the information being provided in the report 
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.
    (c) Method of filing. The terminal report described in paragraph 
(a) of this section shall be filed in accordance with instructions 
pertaining to terminal reports of qualified termination administrators 
published by the Department in the Abandoned Plans section of the 
Employee Benefits Security Administration's website.
    (d) When to file. The qualified termination administrator shall 
file the terminal report described in paragraph (a) of this section 
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), and Sec.  2578.1(j)(7) 
as applicable, 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 or by a bankruptcy 
trustee described in Sec.  2578.1(j)(3) of this chapter or an eligible 
designee described in Sec.  2578.1(j)(4) of this chapter.
    (2) Filing of a report under this section by the qualified 
termination administrator shall not relieve any person from any 
obligation under part 1 of title I of ERISA.

PART 2550--RULES AND REGULATIONS FOR FIDUCIARY RESPONSIBILITY

0
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. at 727 (2012) and Secretary of Labor's Order 
No. 1-2011, 77 FR 1088 (Jan. 9, 2012). Section 2550.401c-1 also 
issued under 29 U.S.C. 1101. Sections 2550.404a-2 and 2550.404a-3 
also issued under sec. 657, Pub. L. 107-16, 115 Stat. 38. Sections 
2550.404a-5, 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.

0
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)(3) 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 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 retirement plan in 
accordance with the requirements of section 401(a) or 403(a), or as a 
tax deferred annuity plan in accordance with section 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 their 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

[[Page 43658]]

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 (v) 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;
    (iii) In the case of a distribution by a qualified termination 
administrator (other than a bankruptcy trustee described in Sec.  
2578.1(j)(3) of this chapter or an eligible designee described in Sec.  
2578.1(j)(4)(ii) of this chapter) 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; or
    (iv) In the case of a distribution by a bankruptcy trustee as 
described in Sec.  2578.1(j)(3) of this chapter or an eligible designee 
as described in Sec.  2578.1(j)(4)(ii) of this chapter with respect to 
which the amount to be distributed is $1,000 or less and such 
bankruptcy trustee or eligible designee, 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--
    (A) The qualified termination administrator may disregard the 
$1,000 threshold therein if the qualified termination administrator 
reasonably and in good faith finds that--
    (1) The participant is deceased;
    (2) The designated beneficiary or beneficiaries are deceased or 
unable to be identified based on records located and updated pursuant 
to Sec.  2578.1(d)(2)(i) of this chapter;
    (3) The estate of the participant is not the designated 
beneficiary; and
    (4) The qualified termination administrator has no actual knowledge 
of any claims by any person to all or part of the deceased 
participant's account.
    (B) If the estate of the participant is the designated beneficiary, 
the qualified termination administrator may disregard the $1,000 
threshold therein if the qualified termination administrator reasonably 
and in good faith finds that--
    (1) An estate does not exist or cannot be found;
    (2) The qualified termination administrator has no actual knowledge 
of any claims by any person to all or part of the deceased 
participant's account; and
    (3) The qualified termination administrator is unable to establish 
an individual retirement plan for the benefit of the estate of the 
participant.
    (C) A summary of the pertinent findings made in paragraph 
(d)(1)(v)(A) or (B) of this section must be included in the notice 
described in Sec.  2578.1(d)(2)(ix)(G) (the Final Notice) of this 
chapter, including the basis for the findings (including the name and 
last known address of the beneficiary, if known) and an attestation 
that the qualified termination administrator has the full name and last 
known address of the deceased participant.
    (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 their 
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

[[Page 43659]]

actions are exempted from the prohibited transaction provisions by a 
prohibited transaction exemption issued pursuant to section 408(a) of 
the Act.
    (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 the Act, 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 part contains a model notice 
that may be used to discharge the notification requirements under this 
section for plans other than abandoned plans. 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. For a model notice for abandoned plans, see Appendix D 
to part 2578.

0
5. Add Appendix A to part 2550 to read as follows:

Appendix A to Part 2550--Model Notice for Section 404a-3

NOTICE OF PLAN TERMINATION

[DO NOT USE FOR ABANDONED PLANS]

[Date of notice]

[Name and last known address of plan participant or beneficiary]

Re: [Name of plan]

Dear [Name of plan participant or beneficiary]:

    This notice is to inform you that [name of the plan] (the Plan) 
has been terminated.
    We have determined that you have an interest in the Plan, either 
as a plan participant or beneficiary. Your account balance in the 
Plan on [date] is/was [account balance]. We will be distributing 
this money as permitted under the terms of the Plan and federal 
regulations. {If applicable, insert the following sentence: The 
actual amount of your distribution may be more or less than the 
amount stated in this notice depending on investment gains or losses 
and the administrative cost of terminating your plan and 
distributing your benefits.{time} 
    Your distribution options under the Plan are {add a description 
of the Plan's distribution options{time} . It is very important that 
you elect one of these forms of distribution and inform us of your 
election. The process for informing us of this election is {enter a 
description of the Plan's election process{time} .
    If you do not make an election within 30 days from your receipt 
of this notice, your account balance will be transferred directly to 
an individual retirement plan (inherited individual retirement plan 
in the case of a nonspouse beneficiary). {If the name of the 
provider of the individual retirement plan is known, include the 
following sentence: The name of the provider of the individual 
retirement plan is [name, address and phone number of the individual 
retirement plan provider].{time}  Pursuant to federal law, your 
money in the individual retirement plan would then be invested in an 
investment product designed to preserve principal and provide a 
reasonable rate of return and liquidity. {If fee information is 
known, include the following sentence: Should your money be 
transferred to the individual retirement plan described, above, 
[name of the financial institution] will charge your account the 
following fees for its services: {add a statement of fees, if any, 
that will be paid from the participant or beneficiary's individual 
retirement plan{time} .{time} 
    For more information about the termination, your account 
balance, or distribution options, please contact [name, address, and 
telephone number of the plan administrator or other appropriate 
contact person].

    Sincerely,

[Name of plan administrator or appropriate designee]

[Name of plan]

PART 2578--RULES AND REGULATIONS FOR ABANDONED PLANS

0
6. The authority citation for part 2578 continues to read as follows:

    Authority:  29 U.S.C. 1135; 1104(a); 1103(d)(1).

0
7. 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 the situations described in 
(a)(1) or (2) of this section.
    (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.
    (2) An order for relief under chapter 7 of title 11 of the United 
States Code (the United States Bankruptcy 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

[[Page 43660]]

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 the United 
States Bankruptcy Code (pursuant to paragraph (j)(2) of this section), 
the plan shall be deemed to be terminated on the ninetieth (90th) day 
following the date of the letter from the Employee Benefits Security 
Administration acknowledging receipt of the notice described in 
paragraph (c)(3) or (j)(6) 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) of this section, that an individual 
account plan has been abandoned, the qualified termination 
administrator shall furnish to the U.S. Department of Labor in 
accordance with instructions published by the Department in the 
Abandoned Plans section of the Employee Benefits Security 
Administration's website a notice of plan abandonment and intent to 
serve as qualified termination administrator 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 this section) in accordance with the provisions of this section;
    (ii) Plan information. (A) The name, address, telephone number, 
account number, EIN of the plan sponsor (if known), and plan number 
used on the Form 5500 Annual Return/Report filed for 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

[[Page 43661]]

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 delinquent contributions described in 
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)(7) of this section (relating to 
Chapter 7 ERISA 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 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 paragraph 
(d)(2)(ii)(B) of this section;
    (B) Allocates expenses and unallocated assets in accordance with 
the plan document, 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 
paragraphs (c)(3) or (d)(2)(ix) of this section.
    (B) Except as provided in paragraph (j)(7)(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 the same or similar 
services provided to customers that are not plans terminated pursuant 
to this section, if the qualified termination administrator (or 
affiliate) provides the 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;
    (2) A statement that the plan has been determined to be abandoned 
by the plan sponsor, or in the case of a Chapter 7 ERISA Plan 
(described in paragraph (j)(2) of this section) a statement that the 
plan sponsor is in liquidation under chapter 7 of the United States 
Bankruptcy Code, 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

[[Page 43662]]

administrator 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) of this chapter, 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's 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 the Act, 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 (vii) of this section, 
furnish to the U.S. Department of Labor in accordance with instructions 
published by the Department in the Abandoned Plans section of the 
Employee Benefits Security Administration's website, 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, email 
address, and telephone number of the person signing the notice (or 
other contact person, if different from the person signing the notice), 
and if applicable with respect to a Chapter 7 ERISA Plan (as described 
in paragraph (j)(2) of this section), the name, address (including 
email address), and telephone number of the bankruptcy trustee if the 
bankruptcy trustee is not the qualified termination administrator;
    (B) The name, account number, EIN, and plan number used on the Form 
5500 Annual Return/Report filed for 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)(7)(iv) 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)(6)(vi)(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 delinquent contributions described in 
paragraph (d)(2)(iii) of this section, or if applicable with respect to 
a Chapter 7 ERISA Plan (as described in paragraph (j)(2) of this 
section), an identification of delinquent contributions and evidence of 
other fiduciary breaches described in paragraph (j)(7)(ii) of this 
section (if not already reported under paragraphs (c)(3) or (j)(6) of 
this section);
    (G) For each distribution in accordance with Sec.  2550.404a-
3(d)(1)(v) of this chapter (relating to distributions on behalf of 
deceased participants and beneficiaries), a summary of the pertinent 
findings as required by Sec.  2550.404a-3(d)(1)(v)(C) of this chapter; 
and
    (H) A statement that the information being provided in the notice 
is true and

[[Page 43663]]

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)(7) 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)(7) 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.
    (4) If the qualified termination administrator is an eligible 
designee described in Sec.  2578.1(j)(4) of this chapter, designated by 
a bankruptcy trustee described in Sec.  2578.1(j)(3) of this chapter, 
both the bankruptcy trustee and the eligible designee shall be treated 
as the qualified termination administrator for purposes of paragraphs 
(e)(1)(i), (e)(2) and (f) of this section. Nothing in this paragraph 
(e)(4) shall serve to relieve the bankruptcy trustee from its 
obligations under or limit its liability for a failure to comply with 
paragraph (j)(5).
    (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 part 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)(6) of this section.
    (j) Special rules for Chapter 7 ERISA Plans. (1) In general. This 
paragraph (j) contains special rules for individual account plans of 
sponsors in liquidation under chapter 7 of the United States Bankruptcy 
Code (Chapter 7 ERISA Plans). These special rules modify, augment, or 
supersede otherwise applicable provisions in paragraphs (a) through (i) 
of this section.
    (2) Deemed abandonment. If the sponsor of an individual account 
plan is in liquidation under chapter 7 of the United States Bankruptcy 
Code, the requirements of paragraph (b) do not apply, and the Chapter 7 
ERISA Plan shall be considered abandoned upon the entry of an order for 
relief, except that the plan shall cease to be considered abandoned 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 a different 
chapter of the United States Bankruptcy Code.
    (3) Qualified termination administrator. For a plan deemed 
abandoned under paragraph (j)(2) of this section, the definition of 
``qualified termination administrator'' in paragraph (g) of this 
section does not apply and only the bankruptcy trustee in the case, or 
an eligible designee (as defined in paragraph (j)(4) of this section), 
may be the qualified termination administrator.
    (4) Eligible designee. The term ``eligible designee'' means--
    (i) any person or entity who accepts in writing a designation by 
the bankruptcy trustee and who meets the requirements in paragraph (g) 
of this section; or
    (ii) an `` independent bankruptcy trustee practitioner.'' An 
independent bankruptcy trustee practitioner is a person other than the 
bankruptcy trustee of the plan sponsor's case, who has served within 
the previous five years as a bankruptcy trustee in a case under chapter 
7 of the Bankruptcy Code, who accepts in writing a designation by the 
bankruptcy trustee and who acknowledges in writing to the bankruptcy 
trustee that they are a fiduciary with respect to the plan.
    (5) Rules and conditions with respect to designating an eligible 
designee.
    (i) The term ``de minimis'' in paragraph (j)(7)(i) of this section 
means:
    (A) Any amount that is equal to or less than $2,000; or
    (B) Any amount greater than $2,000 if the property from which to 
collect delinquent contributions is a realizable value that is equal to 
or less than $2,000

[[Page 43664]]

net of all enforceable liens and applicable exemptions.
    (ii) Prior to designating an eligible designee, a bankruptcy 
trustee must make reasonable and diligent efforts to determine whether 
the plan is owed any contributions (employer and employee) and the 
amount thereof. If the amount of contributions owed to the plan is more 
than a de minimis amount (as defined under paragraph (j)(5) of this 
section), the bankruptcy trustee shall designate an eligible designee 
(as defined in paragraph (j)(4) of this section) to be the qualified 
termination administrator for all purposes under this section.
    (iii) The bankruptcy trustee shall at the time of the designation 
notify the eligible designee of its findings on the amount of 
delinquent contributions (employer and employee).
    (iv) The bankruptcy trustee shall provide an eligible designee with 
reasonable access to any records under the control of the bankruptcy 
trustee that the eligible designee reasonably determines are necessary 
to enable the eligible designee to carry out its responsibilities under 
paragraph (j)(7) of this section.
    (v) The bankruptcy trustee shall be responsible for the selection 
and monitoring of the eligible designee in accordance with section 
404(a)(1)(A) and (B) of the Act.
    (6) Notice of intent to serve as qualified termination 
administrator. In lieu of the content requirements in paragraph (c)(3) 
of this section, the qualified termination administrator shall furnish 
to the U.S. Department of Labor a notice of intent to serve as 
qualified termination administrator 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;
    (ii) Plan information. (A) The name, address, telephone number, 
account number, EIN of the plan sponsor (if known), and plan number 
used on the Form 5500 Annual Return/Report filed for 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;
    (iii) Chapter 7 information. A statement that, pursuant to 
paragraph (j)(2) 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 order or document entered in 
the case reflecting the bankruptcy trustee's appointment or authority 
to administer the plan sponsor's case;
    (iv) Fiduciary breaches. Any information the qualified termination 
administrator believes may be evidence of other fiduciary breaches 
described in paragraph (j)(7)(ii) of this section.
    (v) 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 delinquent contributions described in 
paragraph (j)(7)(i) of this section;
    (vi) 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
    (vii) 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.
    (7) 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. Except for qualified termination 
administrators of plans that are owed no more than a de minimis amount 
of contributions (employer and employee), the qualified termination 
administrator of a plan described in paragraph (j)(2) of this section 
shall, consistent with the duties of a fiduciary under section 
404(a)(1) of the Act, take reasonable steps to collect 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.
    (ii) Report fiduciary breaches. The qualified termination 
administrator must report 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)(6) (notice of intent to serve as qualified 
termination administrator) or (d)(2)(ix) (final notice) 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)(6) 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) 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 bankruptcy trustee or 
an eligible designee defined under paragraph (j)(4)(ii) of this 
section.
    (iv) Pay reasonable expenses. (A) If the qualified termination 
administrator is the bankruptcy trustee in the case, or an eligible 
designee as defined in paragraph (j)(4)(ii) of this section, then in 
lieu of the requirements in paragraph (d)(2)(v)(B)(2) of this section, 
such expenses are consistent with industry rates for such or similar 
services ordinarily charged by qualified termination administrators 
defined in paragraph (g) of this section.
    (B) Notwithstanding paragraph (j)(7)(iv)(A) of this section, in 
lieu of the

[[Page 43665]]

requirements in paragraph (d)(2)(v)(B)(2) of this section, expenses 
incurred to comply with paragraph (j)(7)(i) of this section (pertaining 
to collecting delinquent contributions) are consistent with industry 
rates for such or similar services ordinarily approved by bankruptcy 
courts for persons representing or assisting a bankruptcy trustee in 
performing collection duties in chapter 7 matters.
    (8) Rule of accountability. The bankruptcy trustee or eligible 
designee shall not, for themselves or the other, 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.

0
8. Add Appendices A through E to part 2578 to read as follows:

Appendix A to Part 2578--Model Notice of Intent To Terminate Abandoned 
Plan

NOTICE OF INTENT TO TERMINATE PLAN

[Date of notice]

[Name of plan sponsor]
[Last known address of plan sponsor]

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

Dear [Name of plan sponsor]:

    This letter is a notice of intent to terminate the above 
referenced plan and distribute benefits in accordance with the U.S. 
Department of Labor's Abandoned Plan Program. We will initiate the 
termination process under the Abandoned Plan Program unless you 
contact us within 30 days of your receipt of this notice. See 29 CFR 
2578.1.
    Our basis for taking this action is that our records reflect 
that there have been no contributions to, or distributions from, the 
plan within the past 12 months. {If the basis for sending this 
notice is under 29 CFR 2578.1(b)(1)(i)(B), complete and include the 
sentence below rather than the sentence above.{time}  Our basis for 
taking this action is {provide a description of the facts and 
circumstances indicating plan abandonment{time} .
    We are sending this notice to you because our records show that 
you are the sponsor of the subject plan. The U.S. Department of 
Labor requires that you be informed that, as a fiduciary or plan 
administrator or both, you may be personally liable for all costs, 
civil penalties, excise taxes, etc. as a result of your acts or 
omissions with respect to this plan. The termination of this plan by 
us will not relieve you of your liability for any such costs, 
penalties, taxes, etc. Federal law also requires us to notify the 
U.S. Department of Labor, Employee Benefits Security Administration, 
of the termination. For information about the federal law governing 
the termination of abandoned plans, you may contact the U.S. 
Department of Labor at 1.866.444.EBSA (3272) or https://www.dol.gov/agencies/ebsa/about-ebsa/ask-a-question/ask-ebsa.
    Please contact [name, address, and telephone number of the 
person, office, or department that the sponsor must contact 
regarding the plan] within 30 days in order to prevent this action.

Sincerely,

[Name and address of qualified termination administrator or 
appropriate designee]

 Appendix B to Part 2578--Model Notice of Plan Abandonment and Intent 
To Serve as Qualified Termination Administrator (for Plans Found 
Abandoned Pursuant to 29 CFR 2578.1(b))

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[[Page 43666]]

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[[Page 43667]]


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[[Page 43668]]


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Appendix C to Part 2578--Model Notice of Intent To Serve as Qualified 
Termination Administrator (for Plans Deemed Abandoned Pursuant to 29 
CFR 2578.1(j)(2))

[[Page 43669]]

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[[Page 43670]]


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[[Page 43671]]


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Appendix D to Part 2578--Model Notice of Plan Termination

NOTICE OF PLAN TERMINATION

[Date of notice]

[Name and last known address of plan participant or beneficiary]

Re: [Name of plan]

Dear [Name of plan participant or beneficiary]:

    {Insert as applicable [We are] or [I am]{time}  writing to 
inform you that the [name of plan] (Plan) has been terminated 
pursuant to regulations issued by the U.S. Department of Labor. The 
Plan was terminated because it was abandoned by [name of the plan 
sponsor]. {For plans deemed abandoned pursuant to 29 CFR 
2578.1(j)(2), replace the immediately preceding sentence with: The 
Plan was terminated because [name of the plan sponsor] is in chapter 
7 bankruptcy and the business is shutting down.{time} 
    We have determined that you have an interest in the Plan, either 
as a plan participant or beneficiary. Your account balance on [date] 
is/was [account balance]. We will be distributing this money as 
permitted under the terms of the Plan and federal regulations. The 
actual amount of your distribution may be more or less than the 
amount stated in this letter depending on investment gains or losses 
and the administrative cost of terminating the Plan and distributing 
your benefits.
    Your distribution options under the Plan are {add a description 
of the Retirement Plan's distribution options{time} . It is very 
important that you elect one of these forms of distribution and 
inform us of your election. The process for informing us of this 
election is {enter a description of the election process established 
by the qualified termination administrator{time} .

{Select the next paragraph from options 1 through 4, as 
appropriate.{time} 
{Option 1: If this notice is for a participant or beneficiary, 
complete and include the following paragraph in cases in which the 
account balance will be distributed in accordance with the 
conditions of Sec.  2550.404a-3(d)(1)(i) or (ii).{time} 

    If you do not make an election within 30 days from your receipt 
of this notice, your account balance will be transferred directly to 
an individual retirement plan (inherited individual retirement plan 
in the case of a nonspouse beneficiary) maintained by {insert the 
name, address, and phone number of the provider if known, otherwise 
insert the following language [a bank or insurance company or other 
similar financial institution]{time} . Pursuant to federal law, 
money transferred to an individual retirement plan will be invested 
in an investment product designed to preserve principal and provide 
a reasonable rate of return and liquidity. {If fee information is 
known, include the following sentence: Should your money be 
transferred into an individual retirement plan, [name of the 
financial institution] charges the following fees for its services: 
{add a statement of fees, if any, that will be paid from the 
participant or beneficiary's individual retirement 
plan{time} .{time} 

{Option 2: If this notice is for a participant or beneficiary whose 
account balance will be distributed in accordance with the 
conditions of Sec.  2550.404a-3(d)(1)(iii)), complete and include 
the following paragraph.{time} 

    If you do not make an election within 30 days from your receipt 
of this notice, and your account balance is $1,000 or less, federal 
law permits us to transfer your

[[Page 43672]]

balance to {insert whichever is applicable: ``an interest-bearing 
federally insured bank account;'' ``an unclaimed property fund of 
the State of your last known address;'' or ``an individual 
retirement plan (inherited individual retirement plan in the case of 
a nonspouse beneficiary).''{time}  {If the transfer will be to an 
individual retirement plan, insert the following sentence: Pursuant 
to federal law, your money would then be invested in an investment 
product designed to preserve principal and provide a reasonable rate 
of return and liquidity.{time}  {If known, include the name, 
address, and telephone number of the financial institution or State 
fund into which the individual's account balance will be transferred 
or deposited. If the individual's account balance is to be 
transferred to a financial institution and fee information is known, 
include the following sentence: Should your money be transferred 
into {insert whichever is applicable: ``an individual retirement 
plan'' or ``bank account,'' [name of the financial institution] 
charges the following fees for its services: {add a statement of 
fees, if any, that will be paid from the individual's 
account{time} .{time} 

{Option 3: If this notice is for a participant or beneficiary whose 
account balance meets the conditions of Sec.  2550.404a-
3(d)(1)((iv), complete and include the following paragraph.{time} 

    If you do not make an election within 30 days from your receipt 
of this notice, and your account balance is $1,000 or less, federal 
law permits us to transfer your balance to an individual retirement 
plan (inherited individual retirement plan in the case of a 
nonspouse beneficiary). Pursuant to federal law, your money, if 
transferred to an individual retirement plan would then be invested 
in an investment product designed to preserve principal and provide 
a reasonable rate of return and liquidity. However, if after 
exercising reasonable and good faith efforts, we cannot find an 
individual retirement plan provider who will accept your balance, we 
will transfer the balance to an interest-bearing federally insured 
bank account or to the unclaimed property fund of the State of your 
last known address. {If the bankruptcy trustee or eligible designee 
knows where it will send the participant's or beneficiary's money, 
modify the preceding sentence accordingly and include the name, 
address, and telephone number of the financial institution or State 
fund into which the individual's account balance will be transferred 
or deposited. If the individual's account balance is to be 
transferred to a financial institution and fee information is known, 
include the following sentence: Should your money be transferred 
into {insert whichever is applicable: ``an individual retirement 
plan'' or ``a bank account,''{time} , [name of the financial 
institution] charges the following fees for its services: {add a 
statement of fees, if any, that will be paid from the individual's 
account{time} .{time} 

{Option 4: If this notice is for a participant or participant's 
spouse who will be distributed an annuity under Sec.  
2578.1(d)(vii)(B)(2) to meet the survivor annuity requirements in 
sections 401(a)(11) and 417 of the Internal Revenue Code (or section 
205 of ERISA), complete and include the following paragraph.{time} 

    If you do not make an election within 30 days from your receipt 
of this notice, your account balance will be distributed in the form 
of a qualified joint and survivor annuity or qualified preretirement 
annuity as required by the Internal Revenue Code. {If the name of 
the annuity provider is known, include the following sentence: The 
name of the annuity provider is [name, address and phone number of 
the provider].{time} 
    For more information about the termination, your account 
balance, or distribution options, please contact [name, address, and 
telephone number of the qualified termination administrator and, if 
different, the name, address, and telephone number of the 
appropriate contact person].

Sincerely,

[Name of qualified termination administrator or appropriate 
designee]

[Name of plan]

Appendix E to Part 2578--Model Abandoned Plans Final Notice

[[Page 43673]]

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[[Page 43674]]


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[[Page 43675]]


    Signed at Washington, DC, this 22nd day of April, 2024.
Lisa M. Gomez,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2024-09029 Filed 5-16-24; 8:45 am]
BILLING CODE 4510-29-C