What happens to retirement plan if employer goes bankrupt?

By | March 4, 2015

What if your employer goes bankrupt?

In general, your retirement assets should not be at risk if your employer goes bankrupt. Federal law requires that retirement plans fund promised benefits adequately and maintain separate plan assets of the business assets of the employer. The funds must be held in trust or invested in an insurance contract.Creditors employer can not claim the funds of the retirement plan. However, it is a good idea to confirm that any contributions your employer deducts from your paycheck timely send the plan trust or insurance contract.


Employer Abandoning 401k Plan

Important facts as bankruptcies, mergers and acquisitions can result in employers abandoning their individual account plans (eg, 401k or defined benefits) while a trustee responsible for managing the plan. In this situation, participants often have great problems in accessing the benefits they have earned and have no one to turn to respond to your questions. Custodians such as banks, insurance companies and mutual fund companies are in possession of the assets of these plans, but are not allowed to terminate the plans or distribute the assets. In response to this situation, the Department of Labor issued rules to create a voluntary process in which the custodian settles the business plan in order to make distributions of benefits and finalize the plan.


Steps to take with 401k retirement plan and bankrupt employer

  • If your former employer closes the business, arrangements should have been made ​​for an official plan remains in charge of the payment of benefits and other business plan. If you are entitled to receive benefits and can not contact the plan adminstratot, contact EBSA electronically if you visit the website and click on “Request Assistance” or by calling toll free 1-866-444-3272.
  • Keep a file with information about your plan and the company. If the company no longer exists under its previous name, you might find information in an Internet search engine by entering the former name of the company. If your plan has been abandoned, use the search function on the EBSA website to find out if the custodian of the plan is terminating the plan and the information that allows contact with the custodian.


Merging 401k Plans

If your plan merges with another plan, be sure to read notices about changes in your plan, including changes in benefits and investment options. If your retirement benefits remain with a former employer, keep abreast of any changes to enter his former employer, including address changes, mergers or employer name. If you move to another location, enter the new plan contact information.