DoL Issues Final Missing Beneficiary Rules

The U.S. Department of Labor (DoL) announced final rules under the Pension Protection Act of 2006 (PPA) relating to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers, and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA).

According to a press release, the PPA amended the Internal Revenue Code to allow the rollover of certain retirement benefits of a deceased participant into a tax-favored inherited individual retirement account (IRA) created on behalf of a nonspouse beneficiary. The new rule (and a related class exemption) conforms to the PPA by amending existing distribution requirements for terminated defined contribution plans, including abandoned plans, to require rollovers into inherited IRAs for missing nonspouse beneficiaries.

The DoL is issuing two final rules on selection of annuity providers: one limits the application of the “safest available” standard of Interpretive Bulletin 95-1 to defined benefit plans, and the other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.

The final rule on cross trading addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans, the release said. The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures.

The final rules are published in the October 7 edition of the Federal Register.