The administration or termination of an employee stock ownership plan, 401(k) plan or other tax-qualified retirement plan during a bankruptcy case by the debtor/plan sponsor presents a number of administrative, regulatory and jurisdictional issues. The bankruptcy trustee must comply with regulatory and fiduciary requirements in connection with such retirement plans. This article presents a brief overview of the laws governing the administration and termination of retirement plans in bankruptcy cases under the Internal Revenue Code, Employee Retirement Income Security Act of 1974 (ERISA) and the Bankruptcy Code; jurisdictional issues; and best practices in this area in light of developing Department of Labor (DOL) positions in this context.
ERISA and the Bankruptcy Code require a bankruptcy trustee to administer the debtor’s retirement plan. Generally, the plan administrator of a debtor’s retirement plan is identified in its governing documents and is usually the debtor itself. See 29 U.S.C. 1002(16), 1102(a). The plan administrator is required to discharge its duties solely in the interests of the participants and beneficiaries “with…care, skill, prudence, and diligence under the circumstances.” See 29 U.S.C. 1104(a)(1). The duties of a plan administrator include selecting plan investments; sending notices and communications to participants; maintaining records; making required regulatory filings, i.e., Form 5550; obtaining annual plan audits (small plans may be exempt from annual audit requirements); and paying reasonable expenses incurred in administering the plan. See, e.g., 29 U.S.C. 1103-04. The retirement plan’s governing documents and ERISA may provide for the payment of reasonable expenses incurred in administering the plan out of the retirement plan assets. See 29 U.S.C. 1103(c)(1), 1104(a)(1)(A)(ii), 1108(c).
