Who pays?

[bzorc]

Corporate 401(k) Plan Sponsor goes bankrupt. Filed 2007 Form 5500 without attaching the auditor's report, because an audit was never prepared. IRS/DOL rejects the filing for lack of an audit attachment. Plan Sponsor ignores the notice. A couple of months ago, the owner of the bankrupt corporation (sole 100% owner) receives a DOL $15,000 CIVIL penalty notice for failure to provide a complete 2007 Form 5500 filing. DOL says that since it's a civil penalty, there is no recourse and the $15,000 is now due.

Question is: Who pays the civil penalty? Corporation is bankrupt so there's no money there. Is the 100% owner of the bankrupt corporation personally liable for the civil penalty? Thanks for any assistance!

[K2retire]

One of the main purposes of incorporating a business is to shield the business owner9s) from liability for corporate debts. There are som exceptions to that, which should be discussed with the bankruptcy attorney.

The plan trustee(s) might have some personal liability, but some of the lawyers out there will know better than me.

[jpod]

Isn't the Title I penalty assessed against the Plan Administrator? Who was the Plan Administrator?

[bzorc]

Isn't the Title I penalty assessed against the Plan Administrator? Who was the Plan Administrator?

The bankrupt corporation was the "Plan Administrator".

[Peter Gulia]

Even if the target is confident that she could prove that she isn't and wasn't an administrator, is it possible that she was a trustee (or otherwise was a fiduciary)? Did the corporation's shareholder (and, one guesses, a director) have power to appoint or remove the administrator, arguably making the shareholder a fiduciary to the extent of that power? If the DoL could find any fact to argue that the target is or was a fiduciary, imagine that the DoL could argue that a fiduciary who has knowledge of a co-fiduciary's (the administrator's) breach has duties to take prudent steps to correct or remedy the co-fiduciary's breach.

bzorc, I have some suggestions (turning on where the facts lead) on steps that the target's lawyer could take to persuade EBSA to withdraw its demand. For tactical reasons, it's unwise to show the ideas on a public website that anyone (including government people) could read. Please feel free to call me