The estate of Kenneth Lay, who died after being convicted of heading a fraud that destroyed Enron Corp., agreed to pay $12 million to settle claims on behalf of participants in company pension plans, the Labor Department said.

The proposed agreement must be submitted to a Houston court for approval, and final recovery will depend upon the amount of assets available for distribution from Mr. Lay’s estate.

More than 5,000 jobs and $1 billion in employee pensions were eliminated when Enron sought protection from its creditors in 2001, the second-largest bankruptcy filing in American history.

Mr. Lay, Enron’s founder and chairman, was convicted of orchestrating a fraud that led to the company’s collapse.

“It is important for the parties to be realistic in what they can recover,” said Lynn Sarko, a partner in the Seattle law firm Keller Rohrback who helped negotiate the agreement. “Mr. Lay, prior to his death, was facing a host of lawsuits.”

Mr. Sarko helped win a $134 million settlement in February that Enron workers will split to cover their pension claims. The company is selling assets and pursuing litigation to raise money for creditors owed $51 billion.

Mr. Sarko said that once the settlement is approved by the Houston federal court, a probate court will decide whether there are enough assets in Lay’s estate to pay it.