Bankruptcy

[Guest Kevin1]

I had a client who filed for bankruptcy. The bankruptcy trustee call me, the TPA, about eight months after the filing. In our conversation I mentioned the trustee of the profit sharing plan who is also the owner of the corporation that filed for bankruptcy. She informed me that he wasn't the trustee, that she now was and that she had closed the brokerage account and transfered all the money to her trust account.

Next, I start getting calls from the "old trustee" and from the bankruptcy trustee's attorney asking if her transfer of the money to her trust account had adverse consequences on the ability of participants to roll their money to an IRA. Is her trust account a plan account? Is anyone aware of a special status given to her trust account under these circumstances and her ability to appoint herself trustee?

[Jim Norman]

Not good. She's the corp's bk trustee, she may or may not be the plan trustee, but the plan is still separate from the corp. Time to refer them all to the proverbial ERISA attorney to advise them on how to best sort it out.

[K2retire]

As a TPA, our ERISA attorney advised that the corporate bankruptcy trustee does have the power to appoint a plan trustee, but does not automatically become the plan trustee without such an appointment.

[masteff]

Is is this an "owner-only" (or owner & spouse) plan or are others covered by it as well? I'm getting at whether ERISA applies or if the bk trustee may have concluded that it's a non-ERISA "owner/spouse-only" plan.

If it's an ERISA-protected plan and the bk trustee did this out of simplicity (stupidity) then see Jim Norman's post above.

[Guest Kevin1]

Thanks for the help.

The plan is ERISA covered, there are a number of common law employees in the plan. They were advised to seek counsel on this. I haven't heard anything back.

[david rigby]

I think there has been a similar discussion thread. Perhaps the Search feature will be useful.