Bankrupt Client- Can't find plan trustee

[TPAVP]

I have a client that went bankrupt. Everything was turned over to a bankruptcy attorney who appointed a bankruptcy trustee. The bankrupt client has no assets. The bankruptcy trustee did not know the employer even had a 401(k) plan until we called him. The trustee of the plan is no where to be found. In the meantime, the participants are knocking down our door wanting their money. We have no aurthorization to distribute. How do we go about terminating this plan and distributing the assets when we can not find the trustee and the bankruptcy trustee is of no help??? Not to mention the several payrolls that never went into the plan.

[MoJo]

Ouch. Well, unfortunately, I've had to deal with this situation myself. The trustee in bankruptcy should assume responsibility of the plan, at least pending court approval of a substitute "Plan Administrator." I've seen the trustee in bankruptcy continue to act as plan administrator, I've seen a third party (usually a lawyer) act as such, and I've seen the trustee/recordkeeper assume that responsibility (although usually with a lot of kicking and screaming). The trustee of the plan should make an appearance in the bankruptcy, file a proof of claim for the past due contributions (which may or may not be declared trust assets - I wouldn't hold my breath), and to seek instructions on disbursements.

Good luck.

[rcline46]

I agree MoJo. Make the bankruptcy trustee take responsibility for the plan, include any known payroll deficiencies. Notify the B T of your fees and that you will not work for free. Note that you MIGHT get some fees from the plan.

Tell the participants that they need to contact the DOL with the name of the bankruptcy trustee as you will not act on your own. You are not a fiduciary and cannot authorize distributions.

Then hope it doesn't take 2 years.

[MoJo]

I've done the hope thing. I would suggest prayer....

[TPAVP]

Thanks for the advice. The plan trustee does not care whether the money ever gets distributed because he, of course, never participated in the plan. I'm not sure we could ever get him to do anything, although he can be held personally liable for this. The bankruptcy trustee does not care because there's nothing in it for him and does not feel like it is his problem. I feel sorry for the real losers in this deal- the plan participants. The DOL has already been contacted (more than once) and does not seem that interested in pursuing the problem. I'm not sure why. And here we are, the TPA, stuck in the middle (as usual!!) trying to do the right thing.

[MoJo]

Bypass the bankruptcy trustee and go straight to the court. There is a way (I'm not an expert here) to get the bankruptcy trustee to act....

[Guest]

I think that there is now case law that says that the bankruptcy trustee steps into the shoes of the Plan Administrator. Unfortunately the bakruptcy ttee is an attorney, so you'll probably have to retain an attorney to make him do it.

[TPAVP]

Can your reference any law to that affect? This bankruptcy trustee doesn't think that he is in any way connected to this 401(k) Plan.

[MoJo]

The plan is in fact a liability of the company, and the trustee needs to marshall all of the assets AND liabilities. They usually forget about the latter part of that statement. If it was a responsibility of the company, it now becomes the responsibility of the trustee in bankruptcy.

I'd be interested in a cite too - as I've had this battle with them as well....

[Guest]

Unfortunately I don't have a specific cite,just something thought I saw a year or so ago in one of the services.But in speaking to an attorney she said the same thing as Mojo, that the bankruptcy ttee steps into the shoes of the employer with respect to the company's assets and libilities, including any retirement plans.Many bankruptcy ttees try to avoid the plan issue because it's an area they're not familiar with ,but it's theirs.In any event, as soon as some retirees don't get their checks,or active participants want to roll over their account,they will get their own attorneys or the DOL involved,I'm sure.