Bankruptcy

[Guest JJC]

What are the ramifications for a TPA refusing to pay plan participants until the TPA receives payment for fees incurred? The client is now bankrupt and refuses to make payment for any past due fees or for plan termination and states that their bankruptcy attorney will not allow any fees to be paid from plan assets. Any suggestions on how to make this situation hassle-free?

[Belgarath]

I'd say it depends upon the terms of your contract with the client. I do not believe you can simply refuse to make payouts to participants who are entitled to them. But perhaps your contract specifies that you can cancel services for nonpayment of fees. In which case you wash your hands of the whole thing, and the Trustee is now responsible for payouts, recordkeeping, etc...

I'd certainly check with your legal counsel first.

[BFree]

I'd say "Get a new TPA," but you can't do that. They don't work for free.

[goldtpa]

We were in a similar situatiuon with a client. Obviously if they owed you money you have to get in line with everyone else who is owed money. Any money that was owed to you prior to the bankruptcy you can forget about. However you can get paid for post bankrupcy work. The trustees of the bankruptcy do have a fiduciary responsibility to continue with the plan. In order to get paid for post bankruptcy work, the bankruptcy judge would have to approve it. the problem in bankruptcy is that the now defunct corp does not care if the 5500s are filed on time or not. The IRS and its fines are at the bottom of the creditor pile.

We are still owed 10,000 from our bankruptcy experience and the 5500s are still not done. My advice is that you notify them that they are on a pay as you go service. Don't do anything until you get paid to do it.

[GBurns]

It does not matter what your client's lawyer says, it matters only what the court appointed Trustee and Judge say. Have you filed your claim for the pre-bankruptcy debt and have you approached the bankruptcy Trustee or judge re the current situation and for approval of a pay as you go basis?