| (1) A prior plan vendor may voluntarily terminate its participation in the plan after notifying, in writing, the plan administrator and all participants whose deferrals and investment income are invested in the vendor's qualified investment products. The prior plan vendor must ensure that the plan administrator and the participants receive the written notice no later than the 60th day before the effective date of the termination. (2) A prior plan vendor may establish the effective date of its termination from the plan. The prior plan vendor must clearly state the effective date in the written notice required by paragraph (1) of this subsection. (3) Notwithstanding paragraph (2) of this subsection, if the terminating prior plan vendor sponsors qualified investment products that have specific terms, such as a three-year certificate of deposit or a 30-day passbook account, the effective date of the prior plan vendor's termination may not be before the terms of all those products have expired for every participant unless approved by the plan administrator, the prior plan vendor must hold the participants, the plan and the plan administrator harmless from any fees or penalties that may be applicable in connection with such premature termination. (4) After receiving notice of termination, the plan administrator shall request each affected participant to submit a prior funds transfer form for the disposition of his or her deferrals and investment income. For each participant from whom the plan administrator has not received a prior funds transfer form by the effective date of the termination, the plan administrator shall initiate a transfer of all deferrals and investment income from the terminating vendor's qualified investment products to the revised plan. (5) When a prior plan vendor voluntarily terminates its participation in the plan, the vendor may not charge or permit to be charged a fee or penalty to participants, the plan or plan administrator for the transfers made after the notice of termination. (6) When a prior plan vendor that is an insurance company voluntarily terminates its participation in the plan, this paragraph applies in addition to the preceding paragraphs of this subsection. (A) In this paragraph, the term "terminated life insurance product" means a life insurance product that is no longer a qualified investment product because the life insurance company offering the product has voluntarily terminated the company's participation in the plan. (B) A participant whose deferrals and investment income have been invested in a terminated life insurance product may continue life insurance coverage with the insurance company offering the product. (C) An insurance company that voluntarily terminates its participation in the plan must offer continuing life insurance coverage to each participant whose deferrals and investment income were invested in a terminated life insurance product offered by the company. The insurance company must offer continuing coverage in a life insurance product that is comparable to the terminated life insurance product in which the participant's deferrals and investment income were invested. (D) The premiums for continuing life insurance coverage must be paid by the participant directly to the insurance company and may not be paid with deferrals or investment income. (E) A participant may exercise the right to continue life insurance coverage only if the participant mails to the insurance company written notice of the participant's intention to continue the coverage. The written notice must be postmarked no later than the 60th day after the effective date of the company's termination of participation in the plan. However, an insurance company may increase the 60-day time limit for a participant or for all participants. (F) When a participant elects to continue life insurance coverage, the insurance company with which coverage is continuing may not: (i) refuse to continue the life insurance; (ii) require a postponement or an interruption in coverage for any length of time; (iii) require the participant to provide evidence of insurability; (iv) require the participant to apply for coverage; (v) require the participant to select a different life insurance product from the product in which the participant's deferrals and investment income were invested before the company's participation in the plan terminated; (vi) discriminate in any manner against the participant because of the company's termination of its participation in the plan; (vii) treat the participant differently than the company would treat a non-participant with the same life insurance coverage; or (viii) increase the premiums charged to the participant solely because the company terminated its participation in the plan or because the participant elected to continue coverage. (G) A prior plan vendor must inform the participant in the written notice required by paragraph (1) of this subsection that the participant has the rights specified in this paragraph. A prior plan vendor must send a copy of this notice to the plan administrator. (H) If a prior plan vendor does not comply with subparagraph (G) of this paragraph, then a participant may exercise the right to continue insurance up to the 120th day after the prior plan vendor actually mails written notice to the participant, containing a full explanation of the participant's rights. (g) Inactive prior plan vendors. The plan administrator shall terminate the participation in the plan of an inactive prior plan vendor. See §87.1 of this title (relating to Definitions). (h) Refusal to accept additional deferrals. (1) A prior plan vendor may not refuse to accept additional deferrals to any or all its qualified investment products, even if the refusal would be temporary. (2) If a prior plan vendor refuses to accept additional deferrals to all its qualified investment products, the plan administrator shall terminate the prior plan vendor's participation in the plan. (3) If a prior plan vendor refuses to accept additional deferrals to fewer than all its qualified investment products, the plan administrator shall terminate the participation in the plan of the qualified investment products that are not accepting additional deferrals. (i) Collateralization by banks. (1) This subsection applies only to prior plan vendors that are banks. (2) In this subsection, the term "deferred compensation information" means the cumulative total of all deferrals on deposit with the prior plan vendor as of the end of the previous month. (3) At the plan administrator's discretion, the plan administrator may require a prior plan vendor to report deferred compensation information and additional information to the data collection center no later than 1:00 p.m., central time, on a call-in day that the plan administrator considers necessary to evaluate the collateralization requirement under this subsection. (4) Once each quarter, a prior plan vendor shall furnish to the plan administrator the following information certified by its chief financial officer: (A) its current capital category as defined in the Prompt Corrective Action regulations, 12 Code of Federal Regulations, Part 325, Subpart B, i.e., well capitalized, adequately capitalized, etc.; (B) its total capital to risk-weighted assets ratio as defined in the applicable FDIC regulations; (C) its Tier 1 capital to total book assets ratio as defined in the applicable FDIC regulations; (D) its Tier 1 capital to risk-weighted ratio; (E) its most recent call report and/or other financial report that can be used to substantiate subparagraphs (A) - (D) of this paragraph; and (F) if applicable, evidence of a waiver from the FDIC that permits the prior plan vendor to accept brokered deposits. (5) A prior plan vendor shall immediately notify the plan administrator if the prior plan vendor's capital category changes before its next call report or if its waiver from the FDIC with regard to brokered deposits expires, is revoked, or materially changes. (6) A prior plan vendor must collateralize deferrals and investment income as required by the plan administrator. If a monthly report indicates that a prior plan vendor will lose or has lost FDIC pass-through insurance, the prior plan vendor shall immediately pledge additional collateral and comply with the directives of the plan administrator. The plan administrator may suspend or expel an under-collateralized prior plan vendor in accordance with §87.21(a)(8) of this title (relating to Remedies). Cont'd... |
