Tuesday, June 23, 2009

Pension Benefits and Bankruptcy

A question often asked is if a company files for bankruptcy-court protection, is its pension plan assets protected?

If a company files for bankruptcy-court protection, its pension assets cannot be touched by creditors to pay off debts. A pension plan is a separate entity from the company sponsoring the plan.

Under federal law, pension assets must be kept separate from an employer's business assets and held in trust or invested in an insurance contract. So, in the event of bankruptcy, the retirement funds should be secure from creditors. Some pension benefits may be insured by the federal government, with traditional defined-benefit plans protected by the Pension Benefit Guaranty Corp., a federal government corporation.

If you want to find out about protection of your pension plan you can go to the Mid-America Pension Rights Project, which is a pension counseling project. Web site elderlawofmi.org/pension_rights_project/index.html.

If you are not covered by a pension-counseling project in any way, the Federal Employee Benefits Security Administration also provides free help. www. dol.gov/ebsa and clicking on “ebsa offices.” To see if a pension has been taken over by the Pension Benefit Guaranty Corp., go to pbc.gov and click on “Pension Search Directory.”

-By IRA Technical Consultant Marvin Rotenberg and Jared Trexler
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