My employer is in bankruptcy – what happens to my pension?

20 Apr My employer is in bankruptcy – what happens to my pension?

Your employer’s bankruptcy puts your rights under a pension plan or a 401k retirement plan at risk.  You must take steps to protect yourself if your employer is in bankruptcy or chapter 11.  

  • Get a current summary plan description of the pension or retirement plan from the plan administrator  If you don’t have one, call the Pension Benefit Guaranty Corporation (PBGC) at 1-800-400-7242
  • Find out if the plan continue or will it be terminated
  • Ask who will be acting as plan administrator of the plans during and after the bankruptcy, and who will be the trustee in charge of the pension plan
  • If the pension plan is to be terminated, how will accrued benefits be paid?

If the company is in chapter 7 liquidation, the pension plan or profit sharing plan will be terminated.  However, your benefits are 100% vested and you are entitled to them.  Qualified pension plans are insured by the Pension Benefit Guaranty Corporation – part of the federal government.  Retirement plans like 401k plans are not insured.   In chapter 11, retirement benefits might be impacted by a reorganization plan.  Usually, retirees and employees have representation as a group but you must follow your case.

In all cases, you have to be sure that you file a proof of claim if you want to get a piece of the debtor’s bankruptcy estate.  Consult with a qualfied bankruptcy attorney to get help filing the proof of claim and asserting the proper priority.

If you need help, contact the Employee Benefit Security Administration, EBSA, electronically at www.askebsa.dol.gov or call the EBSA toll-free Hotline at 1-866-444-EBSA (3272) to speak to a Benefits Advisor if you have questions about your options during a bankruptcy. For more information about rights to coverage, click here.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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