Dan Feinberg successfully sued a former Tribune Company employee on behalf of three hundred and twenty-two thousand other employees, recovering over $32 million in pension benefits. During his lawsuit, Feinberg demonstrated that employers used the Employee Stock Ownership Plan (ESOP) as an excuse to manipulate the rules and manipulate the employees’ benefits. As a result, these employees were left holding worthless shares of stock after the company’s 2008 bankruptcy.
ERISA-qualified retirement plans
You’ve probably worried about your creditors pursuing your retirement funds in a bankruptcy lawsuit, but you don’t have to worry. Generally, if your plan is set up under ERISA, you’re protected. This law covers most employer-sponsored retirement plans, including 401(k)s, pensions, and some 403(b) plans. Many people fail to understand that ERISA-qualified retirement plans are protected from creditors under certain circumstances.
When filing for bankruptcy, you must preserve ERISA-qualified retirement plans. These are protected under the Employee Retirement Income Security Act, which protects them from judgment creditors. These plans must follow certain requirements, including maintaining them under the employer’s control, providing retirement income to participating employees, and guaranteeing the continuation of the benefits upon termination of employment. The trustee may also request a quarterly statement if that’s what the company has.
If your IRA is an inherited one, it’s not protected in a bankruptcy case. Bankruptcy Code Section 541(c)(2) prohibits transferring the beneficial interest in an inherited IRA to an outside party. This means that any funds in an inherited IRA are protected by nonbankruptcy law. A judge will then decide what amounts are necessary for support. As a result, you’ll need to be careful not to overextend yourself or overdraw your IRA.
Exempt contributions made through payroll deduction to a benefit plan
Tax-deductible contributions made to a benefit plan for bankruptcy companies may include the number of certain deductions, which do not apply to other types of employer-sponsored retirement plans. Such contributions are generally deductible by the employer for tax purposes. Employers are encouraged to make such contributions to reduce their payroll tax burden. These deductions may be carried forward or deducted in future years. The employer must report the amounts distributed to the employees on Form W-2.
Exempt contributions made through employee payroll deduction to a benefit plan
If a company files for bankruptcy, you may make contributions to a benefit plan through employee payroll deduction. These contributions are deductible for the employer. You may carry forward these contributions to subsequent taxable years. If the employer does not deduct any contributions, these amounts will be considered made by the employer. However, your employer is still responsible for determining whether your contributions are deductible.