Bankruptcy and 401k plans

[Guest lindamichals]

Are there specific guidelines to follow when a company files bankruptcy and there is a 401k plan. Who pays out the participants, submits final deferrals, etc if there is no trustee? Or is the trustee obligated to retain his trustee status until the plan is paid out. What if there is no one in the company to sign for the final 5500? What responsibility, if any, does a TPA firm have to finalize, process paper work, etc? So many questions!!!

[david rigby]

Just a few thoughts:

First search these message boards, using the word "bankruptcy", and read all of the items.

Second, review plan document. It might already have some "bankruptcy trigger", such as automatically terminating the plan. If so, then expect 100% vesting. (That will happen anyway, but the correct timing could be important.)

Third, talk to the plan's ERISA attorney.

OK, mbozek will suggest you reverse the order of these.)

[Harwood]

Of marginal usefulness for your question:

http://www.dol.gov/ebsa/Newsroom/fsbankruptcy.html

[Kirk Maldonado]

If the employer has shut its doors already, this may be of some (limited) value to you: http://www.dol.gov/ebsa/newsroom/fsorphanplans.html

[mbozek]

After an employer files for bankruptcy, the plan falls under the control of the bankruptcy ct. The ct will appoint a trustee to administer the bankruptcy estate who will be responsible for disposition of the plan. You need to find out who is the bankruptcy trustee to discuss the dispositon of the plan. The plans ERISA attorney may no longer represent the plan after the filing since all advisors must be approved by the bankruptcy ct.

It is assumed that the employer has filed for liquidation under Chapter 7. If the employer has filed for bankruptcy under Chapter 11 then the plan will still be the responsibility of the employer.