The U.S. Department of Labor's Employee Benefits Security Administration announced a proposed rule and related class exemption that will make it easier for Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies' retirement plans.

The existing Abandoned Plan Program provides streamlined termination and distribution procedures for abandoned individual account plans, including 401(k) plans, under which benefits may be distributed in a manner that can substantially reduce fees charged to participants' accounts for, among other things, annual reporting, legal compliance and other administrative services, including termination costs.

By making this streamlined process available to Chapter 7 bankruptcy trustees, the time and resources required to "wind up" a bankrupt company's retirement plan can be significantly reduced. As a result, plan participants likely will see fewer administrative and termination fees charged to their accounts and should have access to their money sooner.