required contribution & bankrupt plan sponsor

[eilano]

Plan sponsor has filed for bankruptcy and has no money to fund the money purchase plan contribution for 9/30/01 PYE. Too late to file for minimum funding waiver. Corporate tax return has not been filed yet. Would the trustee (owner) ultimately be responsible for the contribution? Any options available to plan sponsor?

[david rigby]

The sponsor needs legal advice that can consolidate bankruptcy and qualified plan issues.

[mbozek]

You really need to consult a bankruptcy attorney to review the issues. If the plan sponsor declares bankruptcy then all liabilities including the obligation to make contributions by 6/15/02 are suspended by the bankruptcy filing. The plan will become a general creditor of the plan sponsor for the contribution owed and will be eligible for a share of any assets which remain after all of the secured and higher priority creditors are paid off. If the plan sponsor files for chapter 11 there is a possiblilty that the plan sponsor may reorganized and emerge from bankruptcy. Since a DC plan is not subject to PBGC coverage, the benefits are not guaranteed and the plan will probably be terminated by the bankruptcy trustee and the plan assets distributed to the plan participants. Owner should not be liable for the liabilities of a separate corporation which files for bankruptcy if the owner wasnt required to make contributions to the plan.

[Kirk Maldonado]

Don't get a bankruptcy attorney. My experience has been that they can't even spell ERISA. You are better off finding an ERISA attorney that has worked on bankruptcy matters. Unfortunately, that is a pretty small universe.

[mbozek]

The reason the corp needs a bkcy lawyer is that unpaid contributions arising within a 180 day period before the earlier of the filing of the petition or cessation of the business have a priority under Sect 507(a)(4) of the Bkcy act in the amt of up to $4300 per participant. Benefits lawyers are not aware of such provisions.