Newsday reports the case is being brought by 43 employees who had a total of $11.6 million in the retirement trust.
“Participants were induced to enter into compensation deferral agreements and participate in the plan with promises of the value of tax deferred investment growth and little if any discussion of the risks associated with insolvency,” attorney Sean Malloy wrote, according to Newsday.
American Home filed for bankruptcy protection in August saying it fell victim to “extraordinary disruptions” that effectively cut off the funding it needed to make new loans, according to the news report.
The company recently filed a motion in U.S. Bankruptcy Court for the District of Delaware asking that its non-qualified plan be terminated and that assets be directed to the company’s estate.A hearing on the issue is scheduled for October 1, Newsday said.
American Home’s court motion regarding the non-qualified plan is here .
Assets in a non-qualified plan are not subject to the same bankruptcy protections provided for assets in qualified retirement plans.