Multiemployer Trustee Responsibilities

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Other Recent Decisions.
Benefits & Compensation Legal & Legislative Reporter; v42 no11 pp 15-16 Nov 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Central States, Southeast & Southwest Areas Pension Fund et al. v. General Materials Inc., the defendant company notified the union but not the plaintiff plan that it would withdraw from a collective bargaining agreement (CBA). The defendant sought a refund of contributions paid after ending the CBA, while the plan filed for delinquent contributions. The district court denied both. The Sixth Circuit Appeals Court upheld the ruling that the defendant did not owe the overdue contributions. In Lanfear et al. v. Home Depot, Inc. et al., the plaintiffs were former plan participants who claimed the defendant's plan mismanagement reduced the value of their final distribution. The district court observed they had failed to exhaust administrative remedies but dismissed the complaint since they were no longer plan participants. The Eleventh Circuit Appeals Court noted other courts' recognition of former plan participants' standing and remanded the case for further consideration by the district court. In Hurlic et al. v. Southern California Gas Co. et al., the defendant company amended a defined benefit pension plan and made it a cash balance plan. The plaintiffs alleged the plan was age discriminatory, violated ERISA's antibackloading ruiles and violated ERISA's reduction notice requirements. The district court dismissed the claims. The appeals court ruled that cash balance plans are not discriminatory based on age, nor do they violate the antibackloading provision. The court found for the plaintiffs on the notice claim.
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Employee Benefits: Eighth Circuit Rules Bankruptcy Trustee Properly Made Payments to Bank, Not Plans.
Daily Labor Report; no178 p A4 Sep 15, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : When M&S Grading Inc. went into bankruptcy and liquidation, the Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan filed suit over delinquent contributions and the preference the appointed trustee gave to debts owed to a bank. The bankruptcy court refused the motion to remove the trustee for his decision and ruled the unpaid funds were not yet plan assets since they were never withheld from employee paychecks. The Eighth Circuit Appeals Court upheld the bankruptcy court and the supporting district court on all points. The court affirmed that the trustee committed no fiduciary breach in prioritizing debt payments and that the supposed employee contributions never reached the stage of being put into plan assets.
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Does Green Mean Go? Trustee Decision-Making in the Post-PPA'06 Era.
Segal Company: Newsletter; 4 pp Sep 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Pension Protection Act (PPA) identified funding levels as red and yellow zones in danger and a green zone indicating sufficient funding. But green zone plans must monitor funding, attending to funding indicators that can portend troubles. One indicator is Segal's Scheduled Cost, which encourages plan sponsors to keep a funding cushion. Factors that can affect a cushion include minimum funding requirements, multiemployer plan withdrawal liability, the sufficiency of contributions and the PPA zone status. Other parameters include the Funding Standard Account credit balance and expiration, funding modeling and projections. More than a static green zone designation, these factors indicate a plan's potential for insufficient funding.
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Looking at the Impact of Union Mergers on Multiemployer Funds.
Egelberg, Jay K.; Journal of Pension Benefits; v16 no1 pp 55-58 Autumn 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : When unions merge, many details demand attention. Legal issues must be addressed, including current compliance with IRS, DOL and Department of Treasury regulations and PBGC approval. The respective boards of trustees must consider funding status, withdrawal liabilities and outstanding obligations and administrative business. After comparing plans for contribution rates, eligibility, vesting, benefits and reciprocity, they should draft a detailed merger agreement and plan for a final audit and a final Form 5500 submission. Within specific time frames, the PBGC must be notified, and participants must be informed of any reduction in benefits.
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Actuary Not Required to Disclose Personal Opinion After Presenting Actuarial Analysis.
Benefits & Compensation Legal & Legislative Reporter; v43[sic] no8 pp 4-5 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Board of Trustees of New Orleans Employers International Longshoremen's Association, AFL-CIO Pension Fund et al. v. Gabriel, Roeder, Smith & Company et al., the Fifth Circuit Appeals Court reviewed the actuarial standard of practice (ASOP) to reach its decision. The appellate court decided the defendant actuary had done all that the ASOP required by preparing and presenting accurate estimates of the cost of paying additional benefits. The court noted the defendant had advised the plaintiffs to consider market decline when reaching its decision concerning the additional benefits. The court also noted there is no support for the plaintiffs' claim that the defendant should have also provided her personal opinion.
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Court Finds Actual Notice of Withdrawal Liability.
Benefits & Compensation Legal & Legislative Reporter; v43[sic] no8 pp 6, 9 Aug 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund et al. v. El Paso CGP Company et al., the Seventh Circuit Appeals Court found that the defendant had not received notice of withdrawal liability. The notice was issued by the plaintiffs in June 1999 in response to a Chapter 7 bankruptcy filing by the defendant. The bankruptcy trustee did not inform the defendant of the proof of claim for withdrawal liability. A notice of employer liability and demand for payment requires the plan sponsor to begin making scheduled payments or arbitrate within 90 days of the notice. However, the court did find that in late 2001, the defendants' attorney had discovered the notice and demand while performing due diligence and so had triggered the defendant's obligation to arbitrate.
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Other Recent Decisions.
Benefits & Compensation Legal & Legislative Reporter; v42 no7 pp 15-16 Jul 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Gertjejansen v. Kemper Insurance Companies, Inc. the Ninth Circuit Court of Appeals upheld the district court's ruling denying permanent disability benefits to the defendant because the defendant did not cooperate in repeated attempts to schedule a case management appointment. In Virga et al. v. Big Apple Construction & Restoration Inc. et al., the court held both the defendant liable and the defendant company's president personally liable for unremitted contributions of $730,280.22 plus interest and statutory damages, costs and attorney fees. In O'Meara v. The Cit Group, Inc. the court concluded that dental work contracted for, dental work begun and payment made for that dental work in a given year is an eligible expense for that year and should be paid by the defendant's flexible spending account.
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Bankruptcy: High Court Won't Review Ruling Finding Bankrupt Company President Isn't Fiduciary.
Maresca, Meredith Z.; BNA's Pension & Benefits Reporter; v35 no24 p 1,413 Jun 17, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Board of Trustees of Ohio Carpenters' Pension Fund v. Bucci, the Supreme Court let stand the ruling of the Sixth Circuit Appeals Court that ERISA did not apply to a company president and sole shareholder in personal bankruptcy. The defendant had a collective bargaining agreement with the plaintiff fund but owed delinquent contributions of $99,300 when he filed for bankruptcy. The Sixth Circuit found the defendant did not exercise control over the money and had only a contractual relationship with the union fund, not a fiduciary one. The court considered ERISA's fiduciary capacity requirement in the Bankruptcy Code's Section 523(a)(4) not to be met in this case since no fiduciary duties existed prior to the debt.
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Running Your Training Fund Like a Business.
Beebe, Lawrence R.; Benefits & Compensation Digest; v45 no6 pp 36-41 Jun 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : At the Trustees Institute for Jointly Managed Training and Education Funds, participants heard about how to run a training fund in a business like fashion. Some attendees were union training fund coordinators but having to take on the role of a fiduciary. The duties of a fiduciary place greater strictures on what a training fund coordinator can do, since they can only operate the training fund for the direct and exclusive benefit of the participants and beneficiaries. Training fund coordinators must pay close attention to cash handling procedures, investments, income sources, reporting requirements, unrelated business income tax, budgeting and recordkeeping and follow best business practices.
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Collective Bargaining: Multiemployer Fund Can Expel Employer for Replacing Employees With Contractors.
BNA's Pension & Benefits Reporter; v35 no18 p 988 Apr 29, 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to the U.S District Court for the Northern District of Iowa's ruling in the case of Borntrager v. Central States, Southeast and Southwest Areas Pension Fund, a multiemployer pension fund was entitled to expel a contributing employer for replacing departing employees with independent contractors. The court granted summary judgment in favor of the defendant, finding a trust agreement for the fund gave trustees the power and fiduciary duty to ensure that the fund did not suffer financially. The court held that the fund did not act arbitrarily by expelling the plaintiffs' company but not another company which had not made contributions for part time employees. It found not contributing for part time employees did not harm the financial integrity of the fund.
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The Year in Collections: Have We Learned Anything New?
Staab, Andrew E.; Benefits & Compensation Digest; v45 no3 pp 1, 13-16 Mar 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Collection of contributions for multiemployer benefit plans is a fundamental requirement for plan operation. Legal cases in 2007 about delinquent contributions were largely about written terms of agreement, collection and delinquency procedures and efforts to transfer blame for delinquency. The cases demonstrate the need to be wary of waivers and releases, the importance of employer conduct over a formal signed agreement, the importance of a detailed agreement rather than assumptions about intent and other lessons. Some employers tried to avoid liability by establishing alter ego companies. Fund trustees must collect owed contributions and be aware of efforts to escape payment.
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Field Assistance Bulletin No. 2008-01: Fiduciary Responsibility for Collection of Delinquent Contributions.
6 pp Feb 1, 2008; misc. publication

Availability : International Foundation of Employee Benefit Plans
Abstract : In Field Assistance Bulletin No. 2008-01, Robert J. Doyle of the Employee Benefits Security Administration explains that pension plan trustees are fiduciaries and responsible for enforcing claims to delinquent plan contributions. Though trustees can consider certain issues when deciding whether to pursue a claim, generally the failure to collect delinquent contributions is an ERISA prohibited transaction. A plan fiduciary can appoint a trustee with discretionary authority over plan assets, a directed trustee or an investment manager to be responsible for monitoring and collecting employer contributions. If no trustee or investment manager is named, then the fiduciary who has authority to hire trustees may be liable for losses from delinquent contributions.
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Fiduciary Liability Insurance for Trustees: What Are You Missing?
McCreary, Michael C. P.; Clynick, Carrie L.; Canadian Benefits & Compensation Digest; v26 no1 pp 11-13 Feb 2008; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Plan trustees need to understand what their fiduciary liability insurance covers. All policies contain conditions that must be fulfilled before, during and after a claim. The average policy also contains nine to 19 exemptions or exclusions including the requirement that any previous or pending claims be disclosed before the policy is purchased. Liability policies will not protect fiduciaries against criminal or fraudulent acts. Trustees must give written notice with particulars as soon as possible concerning a claim. If a claim is injunctive but not monetary, the policy will not cover it, nor will it cover claims of libel, slander, defamation or bodily injury.
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Benefits Facts 2008.
Bitzer, Frank J.; Fenton, John H.; Ferrigno, Nicholas W., Jr.; King, Sonya E.; Stenken, Joseph F.; 877 pp 2008 2008 ed.; book

Availability : International Foundation of Employee Benefit Plans
Abstract : The basic rules for employee benefit plans are presented in question and answer format. Covers employee welfare benefits, retirement benefits, nonqualified deferred compensation plans, Taft-Hartley plans, plan fiduciaries and prohibited transactions and exemptions.
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CCH 2008 U.S. Master Pension Guide.
Kaster, Nicholas; Kennedy-Luczak, Kathleen; McInerney, Kerry; Panszczyk, Linda; Pope, Elizabeth; Puzzo, Edward; Strzelecki, John; Sulzer, Glenn; Turan, Tulay; 1235 pp 2008; book

Availability : International Foundation of Employee Benefit Plans
Abstract : A comprehensive overview of qualified retirement plans is provided. Covers the requirements established by the IRS and the DOL, such as minimum participation, coverage and vesting rules; nondiscrimination requirements; and rules for distributions, reporting and disclosure, funding and fiduciary standards. Special rules for 401(k) plans, ESOPs, TSAs, IRAs and SIMPLE plans are discussed. Changes to laws, regulations, and key court decisions are incorporated. Reflects changes of the Pension Protection Act of 2006.
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ERISA Facts 2008.
Bitzer, Frank J.; Ferrigno, Nicholas W., Jr.; 825 pp 2008 2008 ed.; book

Availability : International Foundation of Employee Benefit Plans
Abstract : Discusses the management of ERISA plans and assets. Areas covered include establishing and administrating a plan, health benefit issues, fiduciaries, their duties and fiduciary responsibility, prohibited transactions and exemptions, investments, multiemployer plans, MEWAs, civil compliance and enforcement, and criminal enforcement. Includes information on laws, regulations and court cases.
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The 2008 Pension Answer Book.
Krass, Stephen J.; 2080 pp 2008; book

Availability : International Foundation of Employee Benefit Plans
Abstract : Covers pension topics related to starting or continuing a pension plan; choosing the plan; and complying with federal regulations. Topics include vesting, minimum distribution requirements, funding requirements, taxation of distributions, multiemployer plans, rollovers and fiduciary responsibility. Changes due to legislation are incorporated as well as all IRS rulings and regulations that interpret them. Pertinent IRC and ERISA sections, Treasury and DOL regulations, letter rulings, notices and announcements, and case law are presented.
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Identifying Plan Fiduciaries.
Gertner, Marc; Benefits & Compensation Digest; v44 no11 pp 22-25 Nov 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : ERISA makes clear that any person who has discretionary authority over a benefit plan's design, administration or assets or who is in a position to provide direct or indirect investment advice for a fee is a fiduciary. Yet several cases reveal confusion remains over who meets the conditions. Courts have agreed with the DOL that anyone who carries out fiduciary functions is a fiduciary whether specifically named or not. Plan investment managers, trustees and enrolled actuaries are fiduciaries, and the fund counsel is most likely as well. Even seemingly minor office responsibilities such as check signing authority can lead to fiduciary status.
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ERISA: Justices Deny Review of Court Ruling on Return of 'Plan Assets' to Union Fund.
McGowan, Kevin P.; Daily Labor Report; no195 p AA2 Oct 10, 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In October 2007 the U.S. Supreme Court declined to review an appellate court decision in Middleton v. Trustees of the Southern California Bakery Drivers Security Fund. The review petition, filed by the International Brotherhood of Teamsters welfare fund, sought to reverse a decision requiring it to return $1.8 million to the Southern California Bakery Drivers Security Fund, with which it had a trust-to-trust agreement to provide death and disability benefits. The appellate court decision found that the Teamsters fund had violated its fiduciary duty under ERISA by refusing to return the funds when the agreement ended. The Teamsters fund claimed that it was covered under ERISA's insurer exception and could keep the funds. The appellate court disagreed and characterized the money as assets of the Bakery Drivers fund.
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Life in the Yellow Zone: Operating an Underfunded Multiemployer Plan Under PPA.
Ruschau, William J.; Benefits Quarterly; v23 no4 pp 45-48 4th Qtr 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Pension Protection Act (PPA) imposes requirements on multiemployer pension plans with plan years starting in 2008 or later. Trustees must evaluate the plan's financial status, anticipate how it is likely to change over 20 years and plan to meet financial liabilities. While they may have adopted this strategy anyway, the PPA enforces it and implements a time line. Plans in the yellow zone, under 80 percent funded or projecting a deficiency within seven years, must notify participants and others of the financial status and take steps to overcome the deficiency. They may not add benefits or lower contributions. To prepare for 2008, trustees should review actuarial assumptions and projections and plan a strategy to resolve the funding shortfall.
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Pensions: Existing Guidance Provides Flexibility for Multiemployer Expenses, Official Says.
Wyand, Michael W.; Daily Labor Report; no134 p A5 Jul 13, 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Pension Protection Act's (PPA) funding rules for underfunded multiemployer plans give rise to unanticipated expenses. Robert J. Doyle of the Employee Benefits Security Administration told the ERISA Advisory Council's Working Group on Fiduciary Responsibilities and Revenue Sharing Practices that the flexibility in Field Assistance Bulletin 2002-02 should suffice to address how these expenses can be treated. But working group members noted outstanding questions, such as those relating to settlor expenses and fiduciary functions. Doyle advised that if plan documents state trustees carry out functions that would otherwise be settlor, then ERISA fiduciary provisions apply. Generally PPA implementation costs are administrative and can be paid from plan expenses.
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Pensions: Attorneys Say Beck Ruling on Plan Mergers Is Narrow but Has Fiduciary Implications.
Meyer, Jo-el J.; Daily Labor Report; no116 p A2 Jun 18, 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The U.S. Supreme Court ruled in Beck v. PACE International Union that Crown Paper Co. had not breached its fiduciary obligations in terminating its single employer pension plans upon filing for bankruptcy in 2000. The union argued that Crown had breached its fiduciary responsibility by opting to purchase annuities instead of merging the single employer plans into a multiemployer fund. The Supreme Court disagreed since merging plans is not a permissible way of terminating them according to ERISA. The Court further ruled that terminations permitted by ERISA must be in accordance with provisions in the pension plan.
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ERISA: Unanimous Supreme Court Rules ERISA Doesn't Permit Plans to Terminate by Merger.
Meyer, Jo-el J.; Daily Labor Report; no112 p AA3 Jun 12, 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The U.S. Supreme Court ruled that a bankrupt employer did not breach its fiduciary duty by terminating its retirement plans through annuitization rather than investigating the option of merging its plan with a multiemployer plan. This unanimous decision reversed a circuit court decision in the case of Beck v. PACE Int'l Union. The court agreed with the argument that ERISA did not allow mergers as a termination method because mergers are an alternative to plan termination.
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Beck v. Pace Int'l Union: Blurring the Settlor/Fiduciary Divide.
Martin, Craig C.; Scogland, William L.; Employee Relations Law Journal; v33 no1 pp 100-106 Summer 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Ninth Circuit Court of Appeals' decision in Beck v. Pace International Union is up for review by the Supreme Court and should be overturned. The appeals court's ruling confuses the role of a settlor for a pension plan and a fiduciary. A settlor has the power to decide on plan design, including establishing, modifying or ending the plan. As such, the settlor's decisions are beyond ERISA's scope for fiduciary responsibilities. In the Beck case, the court viewed merging into a multiemployer plan as a way to terminate the plan and failed to appreciate that the choice between merging and terminating is a settlor decision, not a fiduciary one.
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Framing an Effective Fraud Policy.
Beebe, Lawrence R.; Benefits & Compensation Digest; v44 no4 pp 30-35 Apr 2007; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Participants in workshop discussed fraud policies for multiemployer benefit plans and generated strategies to combat fraud. They agreed that having a policy deters fraud, reduces loss and protects the plan and trustees. The advantages overcome the obstacles to creation. The policy should include a clear definition, the consequences of fraud, the contact person when fraud is suspected and a whistle blower policy. The policy must be publicized, and all employees must sign on and be trained. Followup should include an operational audit, and an oversight committee should establish actions to take when fraud is reported.
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