Who Moved My Nest Egg?

Think the shaky housing market threatens your retirement nest egg? You got nothing on the former employees of New Century Financial Corp.

In a lawsuit filed this week in U.S. Bankruptcy Court in Wilmington, Delaware, several former employees accuse the subprime mortgage broker of having forced them to pay into a deferred-compensation plan, then taking over the plan to pay off creditors when it filed for bankruptcy protection.

The suit seeks class-action status on behalf of at least 500 New Century employees. They are seeking $43 million.

The Irvine, California, lender collapsed into bankruptcy in April amid rising defaults and tighter credit markets. It has laid off most of its 5,000 employees and is in the process of liquidating its assets to satisfy its debts.

In their lawsuit, the ex-employees say New Century "largely unilaterally imposed" the plan on them. Most were not the highly paid senior executives who often participate in such plans.

"In fact," he complaint says, "employees with base salaries as low as $18,000 were considered eligible for the plan based solely upon their projected commission income, which in many cases never materialized."

Still, some plaintiffs say they are owed considerable sums. Gregory J. Schroeder, a former executive vice president of marketing, contends in court papers that the company owes him $876,721 in deferred compensation. Michelle Parker, a former account executive, says she is owed $403,000.

If plaintiffs can persuade a court that New Century's plan was broadly based and not reserved for highly paid employees, they could be protected under the Employee Retirement Income Security Act.

Plans covered by that law are not considered company property in Chapter 11 bankruptcy cases. Separate plans only for highly compensated employees can be treated as company property.

by Mark Stein