Chapter 13 Bankruptcy Office - What type of entity?

[Guest KBuehler]

Is anyone familiar with or have any experience with these types of entities? I see on freeERISA that there are a number of these "companies/offices" around the country that sponsor qualified retirement plans.

We have been approached by one in our state about taking over the admin for their 401(k) plan and we've been trying to determine what type of entity they are.

This is what we've been told by the plan sponsor:

- Chapter 13 Bankruptcy (nationwide) is supervised by the Department of Justice

- Congress created a U.S. Trustee who appoints trustees nationwide to run the office

- Chapter 13 Bankruptcy offices collect fees from debtors and this is what is used to run the office

- Chapter 13 Bankruptcy offices are non-profit organizations (however, trustee says there was nothing like a 1023 Form Application for Exemption filed)

- The appointed trustee for each office has control over the employees – they are not federal employees

- The trustee files a Schedule C for income received from the Chapter 13 Bankruptcy office but does not claim the wages paid to the employees

- The employees receive a W-2 from the Chapter 13 Bankruptcy office which has their own tax identification number – the IRS assigned a tax identification number based upon a filing status of “other – tax exempt trust”

- Chapter 13 Bankruptcy office files the W-2’s but there is no "company" return (either state or federal)

- Chapter 13 Bankruptcy office does not have a local business license

- The trustee says there was nothing like articles of incorporation or any other paperwork when they were set up

- Trustee says they are not part of any state or governmental agency.

Any ideas?

[WDIK]

Is something curious going on here?

[vebaguru]

Isn't it remarkable how KBuehler and JWilliams posted identical messages 4 weeks apart. Apparently he/she didn't care for the responses received earlier. I hope mine was the reason why!

The fact pattern is suspicious by itself. The "entity" exists under federal common law? The bankruptcy trustee is a screw-up, and the potential administrator, while trying to be reasonably cautious, is afraid to go back to this potential client and break the bad news: "Your form of organization is illegal. Your plan is illegal. We won't have anything to do with you until you clean up your act." But that is what Mr/s Williams/Buelher should do.

[mbozek]

V: I would be interested in the basis for your opinion that the form of organization and the plan are illegal for an entity existing under the bankruptcy code.

[GBurns]

I do not see where there is an entity anywhere or that any basis for anything needs to be provided. Why shoot the messenger?. The Trustee is an individual who has been appointed to be a Trustee for Bankruptcy cases. This individual files a Schedule C. There is no state or federally licensed or chartered other "entity". It is not a dba. It is not the Schedule C Trustee who pays the employees nor is it the Trustee who withholds taxes or provides the W-2 etc but some other "entity" which uses a FEIN provided as a result of a questionable filing of a form.

What is this employer "entity"? What form of corporate organization is it? Under what law does it exist as an entity? What exempts it from the various filing requirements?

The last question I would expect is 1 questioning someone who questions the legality of this "entity" as explained in the 1 or 2 "original" post/posts. I would have expected that the entity would be questioned instead.

[Guest KBuehler]

We wanted to be sure to post the question on other message boards that might be related to the question. People don't read all message boards, and we wanted to get as many responses and opinions as possible. Thank you for taking the time to respond to our question. We appreciate and respect all of the discussion generated by our question.

[Kirk Maldonado]

If you post the same question in more than one place, an acknowledgement of that fact (at the end of the posting) would be helpful.

[vebaguru]

T mbozek: A review of the facts reveals that the attorney was appointed by the federal bankruptcy trustee to act as a bankruptcy trustee. The "non-profit" entity must either have been created by a federal statute or it must have been created under state law. In this case there is no evidence of either one. Moreover, they operate the entity as though it were tax-exempt although the IRS has never reviewed it.