Orphan Plan?

[Guest trying2understand]

Here is the situation. Company A sponsors Plan A. Company A filed for bankruptcy, we as the TPA were notified after everything was complete. Company B had one of their related entities we'll call Company C acquire the equity, but not the debt of company A. Meaning this was a stock acquisition, Company C is now the new plan sponsor.

Company B refuses to provide any information about company C. Their position is that they did not purchase the retirement plan, and they are not responsible for it. Meanwhile we have received no participant information from company B as to which ees were retained (we know a large group of them were) and we cannot perform anything other than recordkeeping. Meanwhile our fees add up.

The trustee of Plan A was the former owner of Company A and wants us to pay everyone out, which is illegal.

Does anyone have any thoughts about this? Can we call this an orphan plan? Can we just quit the plan?

[J Simmons]

...Company C acquire[d] the equity, but not the debt of company A. Meaning this was a stock acquisition, Company C is now the new plan sponsor.

If it was a stock purchase, then Company A is now a subsidiary of Company C. Company A remains the plan sponsor (barring any kind of successor transaction and documentation). So I don't think the plan has been orphaned--it yet has a sponsor, Company A which is now owned by Company C. If Company C doesn't cause Company A, through the stock ownership, to take the steps necessary in the role of plan sponsor, EBSA might go after Company C. It was recently posted on the DoL's website that one of EBSA's enforcement activities was going after the owner of a corporation that abandoned the plan, to reimburse EBSA for it's costs and efforts in wrapping the plan up appropriately.

If it was an asset purchase (assets but not liabilities), Companies C and B might be surprised to learn they may have 'bought' the plan too. The federal successor corporate liability standard is much lower than most states' standards to making liability stick to the successor.

Can you just quit the plan? It depends on a number of factors. What does your TPA agreement provide? Do you know of any outstanding problems with the plan that you are responsible for? One option you might want to consider is contacting EBSA and involving it in the situation if Companies B and C won't take action.

[Guest trying2understand]

We do not know the name of Company C, we do not have a contact or any information about it, in the bankruptcy documents its specified as an entity to be selected by Company B. It specifies the "equity" which based upon some feedback from one of the attorneys does mean the ownership transferred hands.

Company B refuses to tell us anything about Company C. My understanding is that Company A no longer exists and was probably dissolved after the acquisition by Company C.

I do know that Company C does have a retirement plan, which complicates things a little bit.

I will take your advice and contact EBSA.

[Guest trying2understand]

Could you post a link to the DOL notice? I can't quite find in the enforcement page where it describes going after corporate sponsors of abandoned plans...

Thanks!

[J Simmons]

Check out http://www.dol.gov/ebsa/newsroom/pr041207.html

also take a look at

http://www.dol.gov/ebsa/newsroom/pr041707.html

and

http://www.dol.gov/ebsa/newsroom/fsabandonedplan.html