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Taxes, Benefits, and Insurance: A Trifecta of Challenges in Receiverships

CRA Annual Conference 2025 | St. Louis
Panelists: Emily Cantwell (Moderator, Lathrop GPM), John Cruciani (Husch Blackwell), Rebecca DeMarb (Kali Resolution, Swanson Sweet), Amir Isaiah (Morgan & Morgan)

Introduction

Receiverships often require navigating a complex intersection of tax obligations, employee benefits, and insurance coverage—what panelists at the CRA Annual Conference 2025 described as the “trifecta of challenges.” The session highlighted the receiver’s fiduciary duties, common pitfalls, and best practices for managing these critical issues while protecting both corporate estates and personal liability.

Receivership vs. Bankruptcy

The panel began by contrasting receiverships with bankruptcies. Unlike bankruptcy, a receivership does not automatically discharge debts. Key distinctions include:

The IRS may file claims in receiverships and can continue collecting on exempt property.
Payment priorities are set by state statutes and the appointing court’s order.
Receiverships are discretionary, not a guaranteed right.

This underscores the importance of careful planning and transparency in the receivership process

Trifecta 2025

The Receiver’s Fiduciary Duties

Receivers must maintain neutrality and transparency, avoiding conflicts of interest while acting in the best interest of creditors, employees, and the estate. Among their obligations:

Filing IRS Form 56 within 10 days of appointment to notify the IRS of fiduciary status.
Ensuring compliance with federal, state, and local tax requirements.
Prioritizing payment of payroll taxes to avoid “responsible person” liability under IRC §6672

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Tax Tasks and Filing Requirements

Critical tax responsibilities for receivers include:

Securing access to tax records and authority in the appointment order.
Filing all required returns and addressing past-due liabilities.
Filing IRS proof of claim manually (Form 4490).
Respecting the Federal Priority Act by paying federal taxes before other unsecured creditors.
For Qualified Settlement Funds (QSFs), filing separate returns when necessary

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Benefits and Insurance Management

Employee retention is directly tied to continuity of benefits. Receivers must:

Communicate openly with staff, maintaining payroll and benefits when possible to preserve value.
Address COBRA, WARN, and state-specific benefit laws during wind-downs.
Review existing policies (health, workers’ comp, liability) and add the receiver or lender as an additional insured.
Prevent coverage lapses, which could increase estate liability

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Risks and Liability Considerations

Panelists cautioned against common mistakes, including failing to file or pay taxes timely, mismanaging employee benefit plans, or ignoring statutory payment priorities. While receivers are generally protected from personal liability absent gross negligence, risks remain—particularly with payroll and trust fund taxes.

To mitigate exposure, receivers should:

Seek indemnification through court orders.
Rely on statutory protections.
Obtain court confirmation of discharge at the conclusion of the case

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Best Practices

To effectively manage the trifecta of taxes, benefits, and insurance, the panel recommended:

Engaging qualified tax, benefits, and legal advisors early.
Monitoring claims, distributions, and compliance closely.
Documenting all actions and communications for transparency.
Seeking court guidance when issues are unclear or disputed.
Learning from case law, such as SEC v. Capital Consultants, LLC (9th Cir. 2005) and Trustees of 1199 National Benefit Fund v. United Presbyterian Home (S.D.N.Y. 2002), which reinforce fiduciary obligations and receiver protections

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Conclusion

The “trifecta” of taxes, benefits, and insurance is one of the most complex aspects of receivership management. As emphasized during the CRA panel, careful attention to fiduciary duties, compliance requirements, and transparent communication with stakeholders can help receivers navigate these challenges successfully while protecting both the estate and themselves from unnecessary risk.