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U.S. Department of Labor
Employee Benefits Security Administration
September 2004
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The Labor Department’s Employee Benefits Security Administration (EBSA)
administers the federal law dealing with retirement, health and other benefit
programs sponsored by private-sector companies. EBSA began receiving an increase
in the number of complaints from workers who could not get in touch with persons
responsible for managing and operating their 401(k) plans. As a result, the
agency launched an enforcement program to re-connect workers with abandoned
401(k) and other retirement plans.
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The Labor Department found that plans may become “orphaned” when there
is no one left with authority to operate the plan due to death of the persons
designated as fiduciaries, neglect to appoint successor fiduciaries, and
corporate mergers or bankruptcies.
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Orphaned plans are usually retirement plans, like 401(k) plans.
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Although most plans are responsibly managed, the Department noticed an
increase in the number of consumer complaints about their inability to reach the
plan or obtain benefits.
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The Department started a national enforcement project on orphan plans in
1999 to protect workers’ retirement benefits.
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Since the project began on October 1, 1999 to September 30, 2004, the
Department has:
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Obtained total monetary results of $299 million, affecting 521,738
participants.
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Opened 1,139 civil and criminal investigations, with 982 civil and criminal
cases closed.
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Located existing plan fiduciaries to take over management of plans, and
alternatively.
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Obtained appointment of independent fiduciaries for 82 separate plans to wind down operations and distribute retirement benefits to participants.
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In one recent case, the Department sued to obtain a court-appointed
independent fiduciary to manage the 401(k) plan of defunct Edgewater Medical
Center in Chicago. The independent fiduciary will have authority to distribute
more than $1 million to the plan’s 293 participants and to terminate the plan.
The suit alleged that the Center failed to terminate the plan after ceasing
business operations in December 2001. The Department also alleged that
participants and beneficiaries were unable to obtain distributions from their
plan accounts.
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The Department started the enforcement project to protect workers who are
at risk of losing some or all of their retirement benefits.
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The typical orphan plan case involves:
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A retirement plan of a small company with fewer than 100 employees;
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Owners of companies that may not have the expertise to properly manage the
plan or understand their role as plan fiduciaries;
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Employees who may not understand the plan rules on operation and
termination of the retirement plan;
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Failure to wind up the business affairs of a plan, especially in situations
involving corporate mergers and bankruptcies.
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EBSA connects workers with their retirement savings from abandoned plans
by:
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Locating plan fiduciaries with authority to manage the plan,
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Requiring responsible plan fiduciaries to fulfill their duties, including
filing appropriate forms to comply with the law and the distributing benefits
owed to plan participants,
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Identifying and penalizing plan officials who fail to carry out their
responsibilities to plan participants, where possible,
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Alternatively, obtaining a court-appointed fiduciary to oversee the
orphaned plan, distribute the assets to eligible workers and their families, and
if necessary, terminating the plan, and
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Working with other federal agencies to help streamline the process of plan
termination and distribution of assets.
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The agency also works with other federal agencies like the Internal
Revenue Service and Pension Benefit Guaranty Corporation to help both
individuals and financial institutions who may wind up as caretakers of orphan
plans by default by streamlining the process of plan termination and
distribution of assets.
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If you think your plan has been abandoned, contact the EBSA staff by calling
the toll-free number at 1.866.444.EBSA (3272) or by email at www.askebsa.dol.gov.
Other publications about retirement benefits are accessible through the
toll-free number or online at www.dol.gov/ebsa under Publications/Reports.
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This fact sheet has been developed by the U.S. Department
of Labor, Employee Benefits Security Administration, Washington, DC 20210.
It will be made available in alternate formats upon request: Voice phone:
202.693.8664; TTY: 202.501.3911. In addition, the information in this fact
sheet constitutes a small entity compliance guide for purposes of the Small
Business Regulatory Enforcement Fairness Act of 1996.
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