Are you looking for benefits from your old retirement plans, including 401(k) plans that have ended? The PBGC may be able to help you with that soon. The agency would allow terminating 401(k) plan sponsors to voluntarily transfer the benefits to the agency without having to set up separate individual retirement accounts for each participant.
The Pension Benefit Guaranty Corporation issued Sept. 19 a proposed rule that would expand the agency’s program to find missing participants and beneficiaries (called “distributees”) of terminated pension plans to those in terminated multiemployer plans, 401(k) plans and small plans covering professional service organizations. See related story, PBGC Seeks to Widen Efforts to Find Missing Plan Participants.
The PBGC said it anticipates the program would be implemented in 2018 for plans that terminate after 2017. The PBGC intends to create a “new, unified pension search database” with information about the missing distributees and their benefits.
Currently, the PBGC has a program that finds missing participants of PBGC-insured single-employer defined benefit plans. The program includes a searchable database and has handled about 43,000 individual accounts over the past 20 years. The PBGC projects that the new program would increase participation from 200 to 3,300 plans, the preamble said.
The program would be voluntary for defined contribution plans. Instead of establishing an IRA at a financial institution for each missing participant account, plans would have the option of transferring benefits to the PBGC or giving them information about the participants’ benefits. However, if a plan chooses to transfer benefits to the PBGC, it must do so for all participants to prevent “cherry-picking,” where a plan turns over all its small accounts to PBGC, while larger accounts that could generate larger maintenance fees for commercial individual retirement plan providers are turned over to private-sector institutions that charge asset-based fees, the preamble said.
Plans transferring benefits to the PBGC would pay a one-time fee of $35 per participant. The PBGC wouldn’t collect a fee for plans only giving information to the agency or for transferring amounts less than $250. The PBGC would guarantee that savers receive at least the “federal midterm rate,” an interest rate that varies from month to month and is now above 1 percent, and give account holders the option of turning balances above $5,000 into a lifetime income stream similar to a traditional pension. See related story, Lost Track of an Old 401(k)? Here's a Plan to Help You Find Your Money.
In most cases, distributees who didn’t make an effective election of a form of distribution would be “missing,” the preamble said.
The preamble said the Department of Labor intends to review and possibly revise its regulations and guidance to coordinate with PBGC’s development of its proposed missing participants program.
Comments on the proposed rule are due Nov. 21, 2016.
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