What to Do About Your 401(k) After Spirit Airlines’ Bankruptcy

SPIRIT AIRLINES 401(k) CRISIS: The 2 Things You Must Check Now

The stability of the Spirit Airlines 401(k) retirement plan is now the number one concern for employees facing the company’s recent financial turmoil. The news of Spirit Airlines’ second Chapter 11 filing in under a year (August 29, 2025) has understandably sparked panic about your retirement savings.

Key Points Regarding the Spirit Airlines Bankruptcy and Your Retirement Savings

• Your existing 401(k) Balance is Safe: By law (ERISA), funds already deposited into your 401(k) are held in a separate trust and are protected from the Chapter 11 bankruptcy.
• Calculate Your Unpaid Match: If your “match” was not deposited before the filing date of August 29, 2025, those funds could be at risk.
• The Proof of Claim: Confirm with your union representative if a Proof of Claim is being filed on your behalf. If not, you will have to do so yourself to protect your unpaid match.
• Priority Status: Employee wages are considered a Priority Claim, up to $17,150 per employee), which improves your chance of recovery.
• The Bar Date: The deadline for filing claims is known as the Bar Date. It will be announced soon. You must file before that deadline.
• Tax-Free Rollover: You can move your 401(k) to an IRA to a new employer with a “direct rollover” to avoid the federal tax withholding.

Take a deep breath: Your existing 401(k) balance is safe.

By law (ERISA), your retirement money is held in a trust, separate from Spirit’s corporate assets. The bankruptcy court cannot touch the money that has already been deposited into your account.

The Real Danger: Your Unpaid Company Match

The critical issue is any matching contribution you earned but Spirit Airlines has yet to deposit by the August 29th filing date. This unpaid money is now classified as a pre-petition debt. This means it is NOT automatically safe! It is a legal claim.

What Steps Should You Take?

1. Calculate the Exact Amount: Use your pay stubs and plan statements to determine the total dollar amount of the company match you earned that was not deposited by August 29, 2025.
2. File a Priority Claim: This unpaid benefit is a high-ranking Priority Claim under the Bankruptcy Code, which increases your chance of getting paid.
3. You might have to file a Proof of Claim form (Form 410) and submit it to the bankruptcy claims agent (Epiq 11).

Furlough and Future Contributions

If you are one of the pilots or flight attendants facing furlough, remember that your regular 401(k) payroll deductions may stop temporarily. That’s not always the norm, but just be aware that it happens.  Your union (ALPA/AFA) is the only party protecting your future benefits and any long-term changes to the 401(k) plan via the process.

If you change employers, you can roll over your 401(k) to an IRA or the new employer’s plan to maintain control. With a “direct rollover,” the funds are transferred straight from the old plan with Spirit Airlines to the new one.

There should be no immediate tax liability, and the mandatory 20% federal tax withholding is avoided. This allows your savings to maintain their tax-deferred status and continue growing for retirement.

You can find additional categories by clicking below or by using the search feature at the top of this page:

• Bankruptcy
• Your Wallet

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.