Enron Participants To Pay Plan Fees After All
In his ruling in New York on Friday, United States Bankruptcy Judge Arthur J. Gonzalez acknowledged the economic damage inflicted on participants, some $320 each, but said that the law did not permit him to place the costs for the plan administration onto Enron’s estate. Last September Gonzalez agreed to consider a request from the Department of Labor and Enron to reconsider his earlier ruling that retirement plan members have to pay the charges (see Enron Bankruptcy Judge Ponders Plan Management Fee Payments ).
Original Plan
The original agreement between the Labor Department, Enron, and State Street called for the company to pay the new trustee’s fees for up to three years to a maximum of $1.5 million per year plus expenses. However, in April, Judge Gonzalez instead supported a group of Enron’s creditors who think that the pension plans should bear the service costs directly (see Judge Overrules DoL, State Street Agreement on Enron ). The Department of Labor had chosen State Street to oversee the Enron plans a year ago (see State Street Gets Nod for Enron Plans ). That move came in the wake of the DOL’s decision to replace members of the Enron Corporation Administrative Committee with an independent trustee (see DOL Taps Enron Fiduciary Replacements ).
Last April, Enron reneged on its initial deal with the Department of Labor to pay the plan administration costs, saying the firm didn’t want to be “taxed” by being responsible for State Street’s fees (see Enron Balks at State Street Fees ). However, less than two months later, Enron was back in bankruptcy court, asking the court for permission to pay trustee fees for its three retirement plans from company, rather than plan, assets (see Enron Shifts Gears On Trustee Fees ).
Creditors had accused the DOL of threatening litigation in coercing Enron to change its position on the issue.
Door Opening
In Friday’s 44-page ruling Gonzalez noted, “The court recognizes that plan participants may be disappointed and frustrated by the potential for an added financial burden. However, the record does not support that such disappointment and frustration standing alone demonstrate a basis for the exercise of sound business judgment.”
However, Gonzalez left open the possibility of reconsidering his ruling if State Street made a motion to do so.