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EBSA's 2005 Regulatory Agenda Includes Participant Contribution Safe Harbor and Guidance on Terminating Orphaned PlansParticipant Contributions Safe Harbor This rule making will amend the regulation that defines when participant monies paid to or withheld by an employer for contribution to an employee benefit plan constitute "plan assets" for purposes of title I of ERISA and the related prohibited transaction provisions of the Internal Revenue Code. The regulation contains an amendment to the current regulation that will establish a safe harbor period of a specified number of business days during which certain monies that a participant pays to, or has withheld by, an employer for contribution to a plan would not constitute "plan assets." According to the EBSA, the amendment is needed to provide greater certainty to employers, participants and beneficiaries, service providers and others concerning when participant contributions to a plan constitute plan assets. Failure to provide the safe harbor that would deprive employers, other plan fiduciaries, and service providers of the certainty they need to optimize compliance with the law. Termination of Abandoned Individual Account Plans This rule making will establish a procedure and standards for distributing the benefits of individual account plans that have been abandoned by their sponsoring employers or plan administrators. The EBSA states that thousands of individual account plans have, for a variety of reasons, been abandoned by their sponsors, creating problems for plan participants, administrators, financial institutions (e.g., banks, insurance companies, mutual funds), the courts and the Federal Government. At present, the potential liability and costs attendant to terminating such plans and distributing the assets inhibits financial institutions and others from taking on this responsibility. Due to ongoing administrative costs and other factors, the continued maintenance of such plans is often not in the interest of the participants and beneficiaries. This rule making will establish a procedure for a financial institution that holds the assets of such a plan to terminate the plan and distribute its assets to the participants and beneficiaries. The rule making will also include standards for determining when plans may be terminated pursuant to this procedure and for carrying out the functions necessary to distribute benefits and shut down plan operations. According to the EBSA, failure to provide guidance in this area will leave the retirement benefits of participants and beneficiaries in abandoned plans at risk of being significantly diminished by ongoing plan administrative expenses, rather than distributed to participants and beneficiaries in connection with a timely and orderly termination of the plan. The EBSA has set no timetable for completion of these two regulatory agenda items. Rick Meigs, President, 401khelpcenter.com, LLC | ||||
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