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THE FIDUCIARY CORNER: Fiduciary Liability for Delinquent Contributions

Failing to make required contributions to a multiemployer benefit plan can become a matter of fiduciary liability in some circumstances. And according to a federal court in Connecticut, that liability attaches personally to company executives who control the corporate checkbook. (Trustees of Connecticut Pipe Trades Local 777 Health Fund v. Nettleton Mechanical Contractors, Inc. (March 15, 2007)). 

Generally, making benefit plan contributions is a settlor – or “nonfiduciary” – function, to which ERISA’s fiduciary rules do not apply. In this case, however, the trust agreement establishing the health fund defined the term “plan assets” to include contributions that were due, but not yet paid. The court therefore concluded that the contributing employer’s delinquent contributions constituted plan assets. When the employer’s president chose to pay corporate creditors before making the required contributions, he effectively exercised authority and control over those plan assets, and thus became a fiduciary under ERISA. That, according to the court, made the president personally liable for the contributions.

This case reinforces two points: First, the ability to exercise any control over “plan assets” can create fiduciary obligations and liability. Second, multiemployer plan trustees can enhance their ability to collect delinquent contributions by paying attention to the language of the trust document.