An ERISA fiduciary includes any person who exercises any authority or control over plan assets. If an ERISA fiduciary breaches his or her fiduciary duties with respect to a plan, he or she is personally liable to the plan for the breach.
In general, employer contributions (other than amounts withheld from employees’ pay) become plan assets only after actually being contributed to the relevant plan. However, in the context of a multiemployer fund, some courts have carved out an exception to this general rule where the plan documents provide that delinquent employer contributions constitute plan assets.
Floppy Mop was a contributing employer to a number of multiemployer funds providing pension, health and welfare, and other benefits. In a prior lawsuit, the funds had obtained a default judgment against Floppy Mop in the amount of $535,158 for unpaid employer contributions to the funds. After Floppy Mop failed to pay the judgment amount, the funds brought suit against Floppy Mop’s owners, alleging that the owners were ERISA fiduciaries by virtue of their exercising authority and control over plan assets.
The trust agreements provided that “contributions paid, and due but not yet paid, are Trust Fund Assets.” Similarly, the funds’ collection policy specified that “all money owed to the trusts, which money (whether paid, unpaid, segregated, or otherwise traceable, or not) becomes a trust asset on the due date.” This language, the district court held, made clear that delinquent employer contributions were plan assets.
The district court then held that Floppy Mop’s owners exercised authority and control over plan assets. Among other factors noted by the court in support of its holding were:
- The owners formed Floppy Mop, no other individuals were ever owners of Floppy Mop, and the owners were Floppy Mop’s only officers.
- Floppy Mop’s owners were the only individuals with check-writing authority for Floppy Mop.
- The owners had both the responsibility and authority for paying Floppy Mop’s bills.
- The owners had the sole responsibility for preparing and signing monthly remittance reports to the funds that reported the amount of work performed by covered employees and the amount of contributions owed to the funds and to pay the contributions owed.
While the immediate impact of the court’s decision is to create liability for delinquent employer contributions against persons in addition to the contributing employer, there may be other consequences associated with plan language that provides for delinquent employer contributions to be considered plan assets. For example, contributing employers to a multiemployer fund generally do not have standing to bring an action under ERISA for breach of fiduciary with respect to a multiemployer fund. However, a fiduciary does possess standing to bring an action under ERISA for breach of fiduciary. As a result, a contributing employer that is considered to be a fiduciary may have standing under ERISA to bring an action against a multiemployer plan’s trustees for breach of fiduciary duty. (Trustees of the Construction Industry & Laborers Health & Welfare Trust v. Archie, D. Nev., 2014)