Q. I am 63 years old and have worked for the same car-parts wholesale dealer for the past thirty years. The company offered a very attractive shared-pay pension plan, which I was expecting to collect on when I reached the age of 65. Between my pension and my social security, I thought I would have enough money for retirement.
I was just notified that our employer filed for Bankruptcy last Friday. All the workers were notified by phone over the weekend. It’s now Monday and I have been calling the company repeatedly but no one is answering the phones. I drove to work to get some answers and the locks on the doors have all been changed. The company is not big, maybe about 40 employees, and now all of us are unemployed. However what concerns me more then anything is my pension.
A. By way of general description, we should first look at how the law of bankruptcy works. For a company that is failing, there are generally two types of bankruptcy options businesses can choose.
Types Of Employer Bankruptcy
If your employer declared bankruptcy, it would generally take one of two forms:
- Reorganization under Chapter 11 of the Bankruptcy Code.
- Liquidation under Chapter 7 of the Bankruptcy Code
Reorganization Under Chapter 11
The “Chapter 11” reorganization will usually mean that your former employer continues to stay in business under the court’s protection and supervision while the company attempts to reorganize its financial affairs and negotiate its contractual obligations with its creditors.
A Chapter 11 bankruptcy may or may not affect your pension. In many cases, employee pension plans continue to exist throughout the reorganization process depending on many factors and circumstances. For example, sometimes an investor enters the picture and assumes ownership of the business for a highly discounted price. If this happens, the new investor must assume the legal liabilities of the company, if the bankruptcy trustee is not able to work out a plan with the creditors.
Liquidation Under Chapter 7
The Chapter 7 bankruptcy will usually mean your former employer liquidates its assets and ceases to exist. Under these circumstances, it is more likely then not, your pension money is lost as well.
What You Should Do
Having learned your company has filed for bankruptcy you need to first make contact with the administrator of the pension plan. If this person is no longer available, you should retain an attorney to contact the employer’s bankruptcy attorney in order to put them on notice of your claims.
The sooner you make contact with them as a creditor, the faster you will get on the list of creditors. Notwithstanding, it is the bankruptcy trustee that will be negotiating and adjudicating the many issues that arises from a commercial bankruptcy.
If You Belonged To A Union
If you are a member of a union you should contact the Union representative and request a status on the pension and back monies owed to you. It is not unusual for the bankruptcy trustee to be in communication with the union, especially on Chapter 13 filings.
What Questions Should I Ask?
Will the pension plan remain intact during the workout period (assuming it’s a Chapter 13 filing) or will it be terminated?
Who will be acting as the plan administrator during and after the Bankruptcy?
Will there be a trustee managing the plan and what is the contact information for this person?
If the pension plan is to be terminated, how will accrued benefits be calculated and paid?
Documents You Will Need To Establish Your Claim
It is strongly advised that before making contact with the Administrator, Trustee or Union representative you first fully educate yourself on the rules and procedures of your pension plan. You will want to know how your pension assets are treated when the plan is terminated. You should have received a written copy of the pension plan rules when the company first employed you.
The plan will also contain a summary description on how your pension plans would be managed and under what contingencies might affect the distribution.
Finally you will want to gather as much information as possible to substantiate the length of your employment, compensation, and contributions to the plan. Your individual benefit statements will provide you with much of this information.
Pensions Are Supposed To Be Protected
Generally, your pensions assets should not be at risk when a business declares bankruptcy, because ERISA requires that the pension monies be adequately funded and be kept in trust for the employee’s sole benefit and protection. This way if the employer declares bankruptcy, the retirement funds should be secure from your employer’s creditors.
In addition, plan fiduciaries are required to comply with ERISA law that prohibits the mismanagement of plan assets. Violations can carry both civil and criminal penalties.
Is My Pension Protected?
Maybe. The federal government through its Pension Benefit Guaranty Corporation insures many different types of pension plans. The corporation, also known as the “PBGC” is operated and owned by the government. Visit the Website to see if your pension is covered.
If you have called your plan administrator and still need help from PBGC, it may be best to directly contact their Customer Contact Center at 1-800-400-7242.
Other Reasons For Contacting EBSA include if:
You are unable to obtain detailed information or documents about your pension plan;
You suspect contributions deducted from your paycheck were not deposited into the pension trust fund;
Your pension benefits were not safe or the assets were not prudently invested;
This Article Was Brought To You By The Elder Law Center of San Fernando.
For More Information Visit Our Elder Law Center or call us at 818-906-1441