When companies fail to remit 401(k) plan contributions, the Department of Labor almost always looks for – and usually finds – fiduciaries to hold responsible. Cases such as these often can be traced to financially troubled plan sponsors trying desperately to juggle the claims of competing creditors. Employee salary deferral contributions somehow become mixed with company cash, and thus delayed on their way to the trust account.
In these circumstances, almost any company executive who has touched the plan will be targeted by the DOL, regardless of the extent of his or her responsibility for plan administration. A recent example illustrates this point. In Chao v. James C. Docster, Inc. (N.D.N.Y. March 31, 2006), the former president of the plan sponsor was identified as a trustee in the plan’s adoption agreement. Although he claimed that he was unaware of this designation and that he took no part in the plan’s administration, the court still concluded that he was a fiduciary. Indeed, the court determined that his “abdication” of his duties as an ERISA fiduciary enabled other parties to commit repeated breaches, making the former president liable for those breaches, as well. The lesson: fiduciary status – and therefore liability – attaches whether or not an individual realizes that he or she is a fiduciary.