Ninth Circuit: Multiemployer Plan Calling Unpaid Contributions 'Plan Assets' Does Not Make Persons Controlling Contribution Payments ERISA Fiduciaries

The Ninth Circuit recently held that a multiemployer pension plan (MEP) cannot label unpaid contributions as "plan assets" so as to impose ERISA fiduciary status on persons controlling the payment of employer contributions to the plan. In Bos v. Board of Trustees, No. 13-15604, 2015 U.S. App. LEXIS 13272 (9th Cir. July 30, 2015), the court rejected the reasoning of the Second and Eleventh circuits, which have held that unpaid MEP contributions can be plan assets if the plan documents expressly define plan assets to include unpaid contractually required contributions.

Liabilities Increase If Unpaid MEP Contributions Are Plan Assets

Employers do not become ERISA plan sponsors or fiduciaries merely by contributing to MEPs. In general, unpaid contributions by employers to MEPs are not plan assets. See, e.g., Cline v. Indus. Maint. Eng'g & Contracting Co., 200 F.3d 1223, 1234 (9th Cir. 2000), cited in Bos. In Field Assistance Bulletin 2008-1, the Department of Labor reiterated its position that an employer contribution becomes an asset of a plan only when the contribution has been made. However, the Second and Eleventh circuits recognize an exception to this general rule where the plan documents expressly define the fund to include future unpaid contributions by employers.Bricklayers & Allied Craftworkers Local 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Constr., LLC, 779 F.3d 182 (2nd Cir. 2015); ITPE Pension Fund v. Hall, 334 F.3d 1011 (11th Cir. 2003). In concluding that unpaid contributions can be plan assets at the time of nonpayment, the Second and Eleventh circuits have treated employers - who control the money contractually owed to the MEP - as MEP fiduciaries. Section 3(21) of ERISA defines a fiduciary to include any individual who "exercises any discretionary authority or discretionary control respecting management of [a] plan or exercises any authority or control respecting management or disposition of its assets."

Many MEP plan documents broadly define "plan assets" to include all contributions required to be made to the MEP, including any unpaid contributions. In claims for unpaid contributions, MEPs frequently argue that contributing employers, and executives who control company finances, are ERISA fiduciaries as to the unpaid contributions. A court ruling that unpaid contributions are plan assets can thus create fiduciary liability for company executives as well as the company. In bankruptcy, such a ruling may make the...