Compliance February 6, 2009

DoL Provides Guidance for Madoff-Maimed Plans

With an expanding list of retirement plans snared by investments tied to Bernard L. Madoff, the Labor Department has published some guidance for plan fiduciaries.
Reported by
Apparently the DoL has been getting calls on the subject. In announcing the guidance, the Labor Department noted that “Recent events regarding Bernard L. Madoff Investment Securities LLC have resulted in fiduciaries, investment managers and other investment service providers asking the Department of Labor about steps they should be taking in connection with employee benefit plans they believe may have exposure to losses as a result of plan assets being invested with Madoff entities.’
Granted, the “guidance’ is largely a common sense recitation of what any fiduciary, charged with responsibility for the assets of others, would be expected to do under the circumstances. In fact, the Labor Department goes so far as to say that ERISA fiduciaries “…should address these events in a manner consistent with their fiduciary duties of prudence and loyalty to the plan’s participants and beneficiaries.’
Essentially, the guidance boils down to this: once you have determined that plan assets were invested with Madoff entities, and it seems that material losses are likely, “appropriate steps should be taken to assess and protect the interests of the plan and its participants and beneficiaries.’
Those steps, according to the guidance, “may include’:
  • requesting disclosures from investment managers, fund managers, and other investment intermediaries regarding the plan’s potential exposure to Madoff-related losses,
  • seeking advice regarding the likelihood of losses due to investments that may be at risk;
  • making appropriate disclosures to other plan fiduciaries and plan participants and beneficiaries; and
  • considering whether the plan has claims that are reasonably likely to lead to recovery of Madoff-related losses that should be asserted against responsible fiduciaries or other intermediaries who placed plan assets with Madoff entities, as well as claims against the Madoff bankruptcy estate.
The guidance goes on to note that fiduciaries must ensure that claims are filed in accordance with applicable filing deadlines such as those applicable to bankruptcy claims and for coverage by the Securities Investor Protection Corporation (SIPC) – and goes on to say that the web site of the court-appointed trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, contains the liquidation notice, claim forms and related claims information, and deadlines for the filing of claims with the trustee.
The bankruptcy trustee, in a January 5 announcement, noted that “Although SIPA (Securities Investor Protection Act (SIPA) requires the trustee to provide notice of a liquidation proceeding to persons who appear to have been customers of the debtor with open accounts within the past 12 months, any person may file a claim.’ The bankruptcy trustee says that “over 8,000 customer claim forms, with detailed instructions for the completion and filing of the forms with the trustee; claim forms and related information to general creditors of BLMIS; and claims filing information to brokers and dealers,’ was mailed on January 2.
It also noted that the deadlines for the filing of claims with the trustee are March 4, 2009 and July 2, 2009. “Close attention should be paid to the deadlines as they are set by court order and by law,’ according to the announcement. “A failure to file a claim by the final deadline, even if by one day, will result in a denial of the claim.’
The web address for the bankruptcy trustee is www.madofftrustee.com. Additional information can be found at http://www.sipc.org/.

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