401K money taken by co. bankruptcy Trustee

[agnespost]

My company went bankrupt, Chap. 7 in October, 09, I tried to transfer my 401K fund to my IRA but was told that the funds were frozen until further notice. Now, I just found where there is a deduction of $1632.00 from MY MONEY for TPA ADHOC Fees. ("Third Party Administrator") but I don't know what this is! I authorized NO fees...I need no administration...I just asked for my money! This is adding insult to injury as I'm missing $2000.00 that was taken from several paychecks right before the bankruptcy and never put into my account.

What is the law on this? Can the Trustee or whoever wants to just take my money? I was told by the Hartford rep that I shouldn't worry since my money was safe and would be easily transferred or I could just let it stay put, after it was unfrozen.

I've contacted EBSA but they are giving me the runaround.

Help, please, someone...I'm nearing retirement and cannot afford to lose all this...on top of the week of work I was never paid for at bankruptcy.

(I've made claims for the 2K and my wages...I'm a RN).

 

[nanannjen]

I dont' know about the fees, but when the company I was with went under, our 401k's were all frozen for a while - I can't remember how long at thsi point, but there was definitely a period of time (months) when we couldn't access them. Hopefully yours is in that same legal limbo. The fees seem a little much, though! Our funds were with Fidelity, and there were no fees.

 

[donheff]

I suspect the trustee is required to freeze them initially to insure they are protected. They may also be required to communicate with the owners (you) to insure that you understand what you can do with the funds. Some employees would likely panic and pull funds in this situation without a proper rollover thus incurring needless penalties.

 

[JustDucky]

There is a clause in my 401K paperwork that says if the company does not pay the management fee every month, the fee can be withdrawn from the participants accounts.

The terms are detailed in the 401k paperwork.

 

[agnespost]

The management fees run approximately $55/month now (this month) and this was the same before the bankrupcy. In no way does that equal the over $1600 that was removed from my account.

 

[JohnDoe]

Perhaps they reclaimed a years worth of company match that wasn't vested.

 

[Martha]

We don't really have enough facts to know exactly what is going on. If your former employer is in chapter 7 and is out of business the plan administrator or an appointed plan trustee may take steps to terminate the 401k plan. No contributions may be withdrawn during the termination process, which may take six months or more. Termination of a plan has costs and the costs of termination may end up coming out of plan participants accounts. It is kind of a messy area of bankruptcy law as to whether the bankruptcy estate or the plan participant assets are responsible for termination costs and I am not up on exactly how these plan terminations are working out.

The contributions you made but were not properly deposited into the 401k by your employer are treated as unsecured claims in a bankruptcy and unfortunately rarely get paid.

Please see my signature.

 

[growing_older]

One of the big selling points when our company first introduced the 401k was that this money was held separately from any company assets and even in the case of bancruptcy or failure of the company, our accounts would still be secure and safe from any company creditors. I believe the assurances were along the lines of "once it's in your account it's YOUR money, so neither the company nor company creditors can touch it in any way."

OP experience and others who've described having their accounts frozen perhaps have experience which doesn't match these promises. If administrators can levy any fee they want ($1600 seems outrageous) and if bankruptcy can wipe out any recent contributions plus give administrators a blank check for "termination fees" then I do not feel very secure that my 401k is "protected" in case of company failure.

 

[agnespost]

ERISA law states that even if I wasn't fully vested when the company went bankrupt, I become 100% at the time it declares bankruptcy. (I was 40% vested but since my company had "voluntary" matching, they only contrituted a small amount during the time I worked there. ERISA also states that the banruptcy Trustee must act in a responsible manner. He has not been doing this. In fact, I had to discover the deadline dates for filing claims with the bankruptcy since he failed to have notice of this sent to me (despite my having contacted him and despite my having proof that he had my information. He also did not contact any of the other employees that I worked with although they too had contacted him to report that they were owed wages and 401K fees. Thankfully, some of us knew how to do this ourselves otherwise we would have lost our rights due to his blantant negligence or purposefully disregarding his duty hoping to have fewer claims).

I'm simply shocked since I even contacted EBSA who is supposed to protect my 401K funds and they have done nothing. Now, I have written my Congressman, my Senator and the Judge trying to find out how to stop the rape of my funds.

I don't believe this...I was a victim of the bankruptcy and now I'm a victim of the Trustee! Any advice as to what else I can do?

 

[Martha]

ERISA law states that even if I wasn't fully vested when the company went bankrupt, I become 100% at the time it declares bankruptcy. (I was 40% vested but since my company had "voluntary" matching, they only contrituted a small amount during the time I worked there. ERISA also states that the banruptcy Trustee must act in a responsible manner. He has not been doing this. In fact, I had to discover the deadline dates for filing claims with the bankruptcy since he failed to have notice of this sent to me (despite my having contacted him and despite my having proof that he had my information. He also did not contact any of the other employees that I worked with although they too had contacted him to report that they were owed wages and 401K fees. Thankfully, some of us knew how to do this ourselves otherwise we would have lost our rights due to his blantant negligence or purposefully disregarding his duty hoping to have fewer claims).

I'm simply shocked since I even contacted EBSA who is supposed to protect my 401K funds and they have done nothing. Now, I have written my Congressman, my Senator and the Judge trying to find out how to stop the rape of my funds.

I don't believe this...I was a victim of the bankruptcy and now I'm a victim of the Trustee! Any advice as to what else I can do?

See a lawyer, but it will cost money. It looks like you need someone to explain exactly what is going on and why.

The bankruptcy trustee is not the one who sends out notices to file claims. That comes from the bankruptcy clerk's office. Who get the notices in a chapter 7 case is based on who are listed as creditors in the papers filed by the debtor. If you were not listed you would not get a notice. Generally, it is not the a chapter 7 trustee's job to insure that the listing is accurate. If your case is a chapter 11 reorganization case the rules are different and the chapter 11 trustee has more duties. You haven't said what type of bankruptcy case it is, but it sounds like a liquidation case of some type.

As a long ago former chapter 7 bankruptcy trustee, if I was aware of employees with unpaid wages or other claims there would be very little that I could do for those employees. My job was to search out assets, liquidate them, and distribute them to creditors who file claims. If an employee called me I might have told them to see a lawyer and to file a claim. It was not my task to help them with their claims and it would be outside the scope of my duties as well as overwhelming work for me if I had to contact employees and explain to them their rights. It just isn't the trustee's job.

Who is your 401k plan administrator? It seems to me that the plan administrator would be the one seeing to the termination of the plan and it might not be the bankruptcy trustee, especially if the case is a chapter 7. ( As a chapter 7 trustee I would never want myself in the position of being a fiduciary under a retirement plan.) I would contact the plan administrator and ask if the plan is being terminated, who will be administrator of the plan during the bankruptcy, and what is the expected timing before your contributions can be rolled over.

See my signature.

 

[agnespost]

The Trustee has a relative (same last name and working in his CPA office) that we were told was "handling our 401K". I spoke with her and she assured me my funds were safe. Is it she who billed and recieved my $1600+? For what? When this Chapter 7 bankruptcy occurred, we were told by a recording on the company's phone to contact the Trustee. He was the only contact given to us for questions. (I am a RN and worked long term agency for the company that folded. There were hundreds of nurses across the country working agency and travel contracts thru this co.). I personally e mailed this Trustee and asked that I be sent notices and he stated in his reply that I would be contacted by the clerk of court "in due time". To quote a bankruptcy site "The Trustee may apply to the court to be relieved of the duty to send notices to all creditors of which he/she is aware." So, I can assume that if the Trustee is aware that I am owed wages and missing 401K funds, that he has an obligation to send me notices that I personally requested. I kept up on this and did get my priority claim in on time. My recruiter who worked for this company recieved a notice that there would be assets from which to pay claims. (There was somewhere near a million dollars coming in from hosptals that owed our company for our hours still to be invoiced and collected). So, while this is a Chap. 7, it is not a no asset case. With all due respect, I do not trust this Trustee, he has been rude and evasive and does not reply to request for information. I believe he has an obligation to the creditors if he is contacted by them, to send them info. Is this correct? And he does, according to EBSA, have an obligation to act in a responsible manner in handling our 401K funds and I hope to see that we are not charged exorbitant fees by his relative/administrator. This is very frustrating. I do not speak from ignorance, I was a paralegal for awhile and worked in bankruptcy. I even wrote and filed Adversarial Proceedings (reviewed by the lawyer but largely unedited and I am familar with the law in this area). I have seen Trustees handle retirement funds but have never heard of anything like what is being done to us under his watch.

 

[Martha]

There are all sorts of rules about who a trustee can hire to do work and court approval is required. I suggest you call a lawyer who does bankruptcy work in your area and discuss your issues and see if you can buy a bit of his time to figure out what is going on and explain it to you.

 

[agnespost]

Thanks so much, Marth, for your advice. Unfortunately, while this company had it's corporate headquarter in Louisiana since its inception in 1982 AND all of the monies from across the nation were paid her and checks issued from here, the bankruptcy was filed in Delaware...they are good to Debtors. I'd have filed a Change of Venue and argued it myself but for the fact that I need to work and could not discover the names of enough nurses who could have paid the fees involved. I asked for this info too from the Trustee to no avail. I will report all this to the Judge and hope that he acts upon it but I'm not betting the ranch...I already lost a chunk of it relying on the honest of the Courts. Thanks again..

 

[agnespost]

I found out today that the bankruptcy TRUSTEE had to approve the charges to our 401K and that The Hartford where the funds are held attempted to stop the fees from being taken. (The Hartford viewed the charges as, and I quote, "obscene and ridiculous"). But their legal team said they had to comply with the Trustee.

Any ideas? Class action?

 

[Martha]

Not enough facts to give you any ideas. Buy some lawyer time.

 

[clifp]

FYI, Agnespost. Despite her desclaimer, about not taking hero posts as legal advice, Martha is a retired law firm partner and knows what she is talking about.

In my experience most lawyers provide a free consultation to give you an opinion if they can help you and how much it will cost. Given that there are limited assets to spread around the many creditors and time could be important. This a situation where you really do need to a least talk to a local bankruptcy lawyer and see if it worth spending money on pursuing.

The internet is great at becoming educated at many things, I don't bankruptcy law is one of them.

 

[agnespost]

It's easy to say "buy some lawyer time" but the fact remains that the bankruptcy was declared in Delaware (altho no business was ever conducted there). I live in Louisiana. My only hope is through EBSA or a class action suit. I've already requested the names of the plan participants and contact information from EBSA. But I believe, due to privacy laws, that I will have to petition the court to get this list...at least I can do this. Then, we may, as a force, have some recourse.

 

[agnespost]

Bankruptcy Law on the Internet

You are wrong, Martha, get on the net and do what lawyers do...look up the law. When I worked as a paralegal that's most of what we did! It's all on there...just have to spend hours studying it.

 

[REWahoo]

How rude...

 

[fisherman]

Asking for free advice from a stranger and then complaining about the service is not going to solve your problem or get you any help. Martha took her time to provide some guidance to someone she has not met for free and that was very gracious.

 

[FinanceDude]

You are wrong, Martha, get on the net and do what lawyers do...look up the law. When I worked as a paralegal that's most of what we did! It's all on there...just have to spend hours studying it.

If you ARE a paralegal, why are you wasting Martha and other's time on here? Do what PARALEGALS do...look up the law on the Internet...........

 

[Martha]

It's easy to say "buy some lawyer time" but the fact remains that the bankruptcy was declared in Delaware (altho no business was ever conducted there). I live in Louisiana. My only hope is through EBSA or a class action suit. I've already requested the names of the plan participants and contact information from EBSA. But I believe, due to privacy laws, that I will have to petition the court to get this list...at least I can do this. Then, we may, as a force, have some recourse.

Bankruptcy (and ERISA) is a matter of federal law. A local bankruptcy lawyer can at least clarify the facts for you and give you an indication as to whether you have some kind of case. FWIW I represented creditors in bankruptcy cases all over the country, sometimes directly after obtaining permission from the court and sometimes simply working with a local lawyer.

 

[Martha]

You are wrong, Martha, get on the net and do what lawyers do...look up the law. When I worked as a paralegal that's most of what we did! It's all on there...just have to spend hours studying it.

I'll give you a pass on the rude statement as you are clearly frustrated. The law involves a mix of facts, procedure and substantive law and "looking it up on the internet" could lead you down all sorts of wrong paths. From what you have said you do not have a clear handle on job one: what are the facts.