Employee benefit plan trustees are responsible for monitoring and collecting delinquent plan contributions and generally may not contract around that duty, according to guidance issued February 1 by the Employee Benefits Security Administration (EBSA). In Field Assistance Bulletin 2008-01(FAB), EBSA noted that even "directed trustees," which have limited fiduciary discretion over the plan, may still be liable as co-fiduciaries for failures to track and pursue delinquent contributions.
The FAB was issued in response to Department of Labor investigations of pension plans that were comprised of plan and trust documents drafted in such a way as to absolve all parties from the responsibility to track and collect delinquent contributions. In other cases, the underlying plan and trust documents were silent or ambiguous as to which plan fiduciary was responsible for delinquent contributions. In either case, EBSA's concern is that without a primarily responsible party to pursue contributions that are due and owing to the plan, legitimate collections claims would languish to the detriment of the plan and its participants and beneficiaries.
As interpreted by EBSA, the statutory framework of ERISA requires that "authority over a plan's assets...including a plan's legal claim for delinquent contributions, must be assigned to i) a plan trustee with discretionary authority over the assets, ii) a directed trustee subject to the proper and lawful directions of a named fiduciary, or iii) an investment manager." To the extent this duty is not properly assigned, the plan fiduciary responsible for hiring and monitoring the trustee(s) and investment manger(s) may be liable for plan losses due to a failure to collect contributions. In addition, if the failure to pursue delinquent contributions is a regular occurrence or part of an agreement (express or implied) between the plan and the delinquent employer, EBSA has indicated that there may be violations of ERISA's prohibited transactions provisions.
The FAB may represent an expansion of EBSA's view of the role directed trustees play in managing plan assets. In prior guidance (FAB 2004-03), EBSA recognized that the scope of a directed trustee's duty is "significantly narrower than the duties generally ascribed to a discretionary trustee." Yet, even if a particular directed trustee is not responsible for monitoring and collecting contributions, that trustee "(including a directed trustee) nonetheless would have an obligation under [ERISA] to take appropriate steps to remedy a situation where the trustee knows that no party has assumed responsibility for the collection and monitoring of contributions and that delinquent contributions are going uncollected."
The FAB's release comes in advance of proposed regulations that will redefine the time period in which participant contributions to individual account plans, like 401(k) plans, must be deposited in trust. Those proposed regulations have not yet been released, but they are currently under review at the Office of Management and Budget and could be released at any time. According to the public comments of EBSA officials, the proposed regulations will likely establish a safe harbor time period for contributions to be deposited into a trust. The current regulatory standard requires deposits as soon as assets can be segregated from the plan sponsor's general assets.
Plan sponsors should review their trust agreements and investment manager contracts to ensure that they have properly assigned or delegated the responsibility to monitor and collect plan contributions. Trust documents or contracts with investment managers should clearly indicate which party is responsible for monitoring and collecting plan contributions. Plan sponsors may also wish to consider establishing a written procedure (or ensure the appropriate trustee or investment manager has a procedure) for determining when and under what circumstances the plan will pursue claims to recover delinquent contributions.