Forced Company Sale

[Below Ground]

Here's a new one, I think.

Employer A is on the verge of bankruptcy. Operations were being kept a afloat using funds obtained from a bank note. Bank decides to sell the note to a 3rd party, who is not related in any way to the company or bank. 3rd party calls note and via foreclosure, seizes all company assets. 3rd party then restarts operations as a new firm using assets of old firm. Even hires a few of the old firm's employees. The old employer still exits on paper, but for intents is gone.

Company maintained a 401(k) Plan, which has an outstanding value from a matching contribution. How does the preceding impact the Plan? Specifically, who is the sponsor and who owes the match and must pay cost of the Plan? I suspect that the preceding is an asset purchase making the old firm wholly responsible for the plan, with no liability for the 3rd party. Since Employer A has no money I also guess that the owners of Employer A could be liable for the match and costs of the plan. Is taking those monies from the accounts of the owner/participants feasible? As an in-service distribution? Can they forgo their match?

Seems to be a real mess.

[Below Ground]

No takers?

[jpod]

You didn't say whether Employer A was a corporation or LLC or other type of entity that generally shields owners from its liabilities. Assuming it is, as a general proposition neither the owners of A nor the buyer of A's assets should have any liability or responsibility vis a vis the plan. But this answer is worth about as much as you just paid for it, so Employer A, its owners and the buyer should consult with their respective legal counsel.

[Below Ground]

Thanks jpod! Totally forgot about this post! Anyway, Company A was/is an S-Corp in the State of NJ. I would agree with you conclusion, except that the owner of Company A is the Trustee, so there is a bit of liability. Not for the issues I listed, but with respect to the liquidation of the trust fund.

It appears that the new owners don't care about the plan. They have made it clear that it is of no concern to them. They are allowing an employee (was adminstrative contact, but not the Plan Administrator) to recieve mail, emails and calls about the plan. Actions that would take more than 20 minutes or so are no permitted on their time. She does that on her own time! She does this because it is "the right thing to do" for her.

We are allowing efforts to see that employees are properly paid out. They are all terminated except the owner, for whom we are not processing a payout (too many bills unpaid). We do the processing of the employee for signature by the Trustee. That's all until we see some of several years of unpaid admin service fees.

[Guest roseH3251]

Wow I can't believe that they can't be bothered by the plan, I would think that in order to at least maintain a reputation they would have taken care of that immediately