U.S. Labor Department Asks Bankruptcy Court To Release 401k Contributions

Springfield, Massachusetts - The U.S. Department of Labor has petitioned the federal bankruptcy court in Springfield to release 401(k) plan contributions withheld from the paychecks of employees of bankrupt N&B Express Inc. from the company’s bankruptcy estate.

N&B Express Inc. was an interstate trucking company in South Deerfield, Massachusetts, that filed for protection of the bankruptcy court on September 2, 2005. The company had sponsored and administered two 401(k) plans for its employees: the N&B Express Inc. Savings and Retirement Plan and the N&B Express Inc. Non-Union 401(k) Profit Sharing Plan.

The plans allowed employees who participated in these employee benefit plans to elect to have contributions withheld from their wages by N&B. Under the Employee Retirement Income Security Act (ERISA) enforced by the U.S. Labor Department, such contributions are fully vested and become assets of the plans. The suit alleges that, from May 2005 through June 2005, employees’ contributions were not segregated from the company’s general assets and were not transferred to the plans. The total withheld from employee pay for contribution to the savings plan during the period was $16,044, and the amount withheld for the profit sharing plan was $10,627.

The department’s complaint asks the court to order N&B to return the employee contributions to the plans since the money belongs to the plans and their participants and beneficiaries, and not the company. Also named in the Labor Department’s lawsuit is the Bank of Western Massachusetts, which has security interests and liens on most or all of N&B’s assets.

ERISA, which is administered by the Labor Department’s Employee Benefits Security Administration (EBSA), is the federal law that protects private sector pension and employee benefit plans.

In fiscal year 2005, EBSA achieved monetary results of $1.7 billion related to the pension, 401(k), health and other benefits for millions of American workers and their families.

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