The Department of Labor’s Employee Benefits Security Administration announced Monday that it has approved a process for JPMorgan Chase Bank NA and ADP to terminate and wind up about 180 defined contribution pension plans abandoned due to corporate crises or neglect.
Phyllis Borzi, assistant secretary for EBSA, said in a statement that EBSA’s program “provides a streamlined process for efficiently winding up abandoned plans,” and that the alliance between JPMorgan and ADP “is an excellent example of how custodians and recordkeepers can team up to terminate abandoned plans and help workers, and we encourage others to do the same.”
As EBSA explains, when employers abandon their individual account pension plans, custodians such as banks, insurers and mutual fund companies are left holding the assets of these abandoned plans, without the authority to terminate the plans and make benefit distributions — even in response to participant demands.
EBSA says that it developed the abandoned plan program “to facilitate a voluntary, safe and efficient process for winding up the affairs of abandoned individual account plans so that benefit distributions are made to participants and beneficiaries.”
One of the plans that JPMorgan and ADP will soon wind up is that of Emergent Business Services, which abandoned its defined contribution pension plan in 2006; plan participants then found themselves unable to access the benefits they had earned.
Under the program, JPMorgan will act as the plan’s asset custodian and serve as the “qualified termination administrator,” and ADP will serve as the plan’s recordkeeper and carry out the activities necessary to wind up the plan.
EBSA says that ADP, as agent, filed the necessary papers with the department on behalf of JPMorgan.
In addition to the Emergent Business Services plan, JP Morgan and ADP have elected to terminate and wind up about 180 other abandoned plans under the program, affecting approximately 690 plan participants and beneficiaries and involving almost $3 million in assets.
EBSA determines a pension plan to be abandoned if 12 consecutive months pass in which no contributions to or distributions from the plan are made, and if a qualified termination administrator determines that the sponsor no longer exists, cannot be located or is otherwise unable to maintain the plan. To date, EBSA says that almost $75 million in distributions have been made under the program.