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Are Missed Contributions Considered Plan Assets Under ERISA?

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The Ninth Circuit gives Company defendants a pass with regard to fiduciary duties surrounding unpaid contributions to a retirement plan, and whether or not those unpaid amounts can be considered true plan assets. But the three judges didn't all agree.

San Francisco, CAAn ERISA lawsuit that alleged fiduciary failings on the part of principles involved with Accuracy Glass & Mirror Co. Inc. (Accuracy) was lost when appellate justices with the Ninth Circuit affirmed a lower court ruling that dismissed, in part, the pension plan lawsuit.

However, the decision of the three-judge panel was split, with one justice filing a dissenting view.

At the heart of the issue, is whether or not unpaid contributions can be legally interpreted as plan assets under ERISA. The latter, the Employment Retirement Income Security Act, as amended in 1974, is the governing basket of statutes that protect the rights and interests of retirement plan members, and the assets thereof. Those responsible for managing the assets on behalf of Plan members carry specific fiduciary duties that are governed under ERISA.

Any alleged breaches of those duties can, and have resulted in retirement plan lawsuits.

According to Court documents, various employee benefit trust funds litigated against Accuracy, as well as Accuracy President Michael Lamek as well as Secretary and Treasurer Kelly Marshall, in 2013. The lawsuit, originally filed in Nevada, claimed that two master labor agreements required Accuracy to undertake contributions towards the employee benefits plan. The trusts, however, alleged that Accuracy had failed to make those contributions – and thus had failed in its fiduciary duties to employees over the missing contributions, which were viewed by the plaintiffs as assets of the Plan. Plaintiffs sought those contributions.

The lower court granted summary judgement to the plaintiffs with regard to their complaint against the firm itself. However, the district court dismissed the portion of the plaintiff’s ERISA lawsuit seeking liability from the two Accuracy principles.

While the ruling of summary judgment against the company was not appealed, the dismissal of ERISA liability against the two company principles was. In a split decision, handed down March 21, the appellate panel affirmed the lower court ruling.

In sum, the majority decision of the appellate panel ruled that case law prevented the plaintiffs from suing Lamek and Marshall as fiduciaries, and thus pursue contributions, by asserting the two defendants exercised fiduciary control over unpaid contributions that were interpreted as assets of the plan.

Is an unpaid contribution to a retirement plan deemed a true asset?

The Ninth Circuit, citing Bos v. Board of Trustees (Bos I 2015), suggested in its majority ruling that unpaid contributions are not true assets of the Plan. “Parties to an ERISA plan cannot designate unpaid contributions as plan assets,” wrote Ninth Circuit Judge Michelle T. Friedland, who penned the majority ruling. She added, “Even an ERISA plan that treats unpaid contributions as plan assets does not make an employer a fiduciary with respect to those owed funds.”

The plaintiffs had noted that Bos I was a bankruptcy proceeding and asserted that fiduciary rules under ERISA are much more broad outside of a bankruptcy proceeding, to which Friedland – citing case law and the previous ruling by the Ninth Circuit in Bos I – disagreed. “Contrary to the trusts’ assertions, the implications of Bos I extend beyond bankruptcy to ERISA,” Judge Friedland wrote, adding that even if the wording of Bos I “left room for doubt,” the Ninth Circuit clarified in a later order that Bos Enterprises Inc. President Gregory Bos was not a fiduciary under ERISA.

One of the three judges did not agree with the majority view

The dissenting voice, US District Judge Sharon L. Gleason – an appellate participant by designation – did not hold the same view of Friedland and Circuit Judge Richard R. Clifton.

“The majority states that Bos I held that parties to an ERISA plan cannot designate unpaid contributions as plan assets,” Judge Gleason wrote in her dissent. “But Bos I did no such thing. To the contrary, it expressly did not decide whether, outside of a bankruptcy context, contracting parties to an ERISA plan may designate unpaid employer contributions as plan assets.”

The ERISA benefit plan lawsuit is Glazing Health and Welfare Fund et al. v. Michael A. Lamek et al., Case No. 16-16155, in the US Court of Appeals for the Ninth Circuit.


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