Only a Qualified Termination Administrator (QTA) can properly terminate abandoned plans
American Trust Custody can provide the level of support that works best for your organization. American Trust Custody’s Abandoned Retirement Plan Service can help recordkeepers bring plans of all sizes to a successful resolution, even those plans with other custodians. to achieve the full potential of its IRA opportunities.
American Trust Custody Abandoned Retirement Plan Services:
File with the Department of Labor for appointment as QTA and termination of the plan
Triage transfer of participant records to American Trust Custody systems
Send USPS notices to participants regarding plan termination and final balances
Search for any lost participants or beneficiaries
Perform disbursements to participants who respond to the notices
Perform tax withholding and remittance of disbursements
File the final 5500 and Summary Terminal Report for Abandoned Plans (STRAP) with DOL
Create IRAs for any lost participants
Continue periodic searches for lost participants and perform required annual mailings
How to Terminate a Qualified Plan
Only a Qualified Termination Administrator (QTA) can distribute assets and terminate the plan under this fiduciary safe harbor. American Trust Custody has been appointed by the Department of Labor as a QTA and can assist in the termination of abandoned plans — even those plans not held in custody at American Trust Custody. We follow stringent guidelines and procedures and can assist in participant notices, calculations, and disbursements in compliance with the regulations.
Fiduciary and Administrative Challenges of Abandoned Plans
While employers launch retirement plans with the best of intentions, every year thousands of plans are abandoned either because the sponsor has ceased business operations or simply becomes unable or unwilling to continue support of the plan. Of course, the risk of plan abandonment was significantly elevated in recent years given the number of businesses that closed due to the COVID-19 pandemic.
Participants in abandoned plans suffer the consequences. Advisors may stop servicing the plan, resulting in investment lineups that may contain underperforming funds. Recordkeepers may scale back services, resulting in participants being unable to manage their accounts. Participants seeking access to loans or hardship distributions may find themselves unable to access funds, with no recourse.
The Department of Labor has addressed these concerns by creating the Abandoned Plan program, providing custodians with a fiduciary safe harbor to help participants regain control of their accounts and access to their savings. Suppose a plan cannot be voluntarily terminated using standard procedures contained within the plan document. In that case, the plan may be deemed abandoned and then be unwound utilizing the Department of Labor’s Abandoned Plan procedures.
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