Consultant Launches 3(16) Fiduciary Services

Northeast Professional Planning Group Inc. (NPPG) now offers ERISA 3(16) fiduciary services to assist plan sponsors in day-to-day administration and compliance efforts.

Employers that provide a retirement savings plan have a fiduciary responsibility to keep the plan in compliance with the Employee Retirement Income Security Act (ERISA). Plan sponsors unable to meet this requirement could be subject to costly fines and face possible litigation from participants.

The 3(16) services from the Red Bank, New Jersey, firm include oversight of the day-to-day retirement plan operations such as:

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  • Reasonableness of vendor compensation under ERISA Section 408(b)(2);
  • Providing summary plan descriptions;
  • Complying with participant disclosures under ERISA Sections 404(a)5 and 404(c);
  • Approving plan qualified domestic relations orders (QDROs) and other distributions;
  • Approving, signing and filing Internal Revenue Service Form 5500; and
  • Other responsibilities.

“Employers provide a retirement plan to attract and retain top talent but find the ever increasing demands on the plan sponsor to be an administrative burden. As the compliance landscape continues to evolve, many plan sponsors and trustees realize that they are not able to meet their administrative obligations and want a firm who will do it for them,” says Michael M. Salerno, NPPG founder and CEO. “Our ERISA 3(16) fiduciary service can alleviate much of the strain on the plan sponsor’s internal resources enabling them to focus on company growth.”

Over the past several years, the pension industry has seen a rise in claims against plan sponsors from displeased participants, says Salerno, adding, “As the appointed 3(16) plan administrator we relieve the plan sponsor of certain financial liability. Plan sponsors can feel confident knowing that our fiduciary service enables their plan to be administered efficiently while minimizing its exposure to risk.”

Northeast Professional Planning Group (NPPG) is a provider of employee benefits, retirement planning and actuarial consulting services. More information is available at 732-758-1577 or atwww.northeastprofessional.com.

Firms Found Liable for Multiemployer Plan

A federal appellate court found two firms are successors for purposes of multiemployer plan liability for a closed business.

In the case of Sullivan v. Running Waters Irrigation Inc., the 7th U.S. Circuit Court of Appeals determined that the U.S. District Court for the Northern District of Illinois created a “clear picture of notice and continuity” in terms of Employee Retirement Income Security Act (ERISA) standards, and it “did not err in concluding that an interest had been transferred from Alpine [Irrigation Company] to RWI [Running Waters Irrigation] and JV [JV Equipment Leasing] within the meaning of Rule 25(c).”

According to the court opinion, RWI and JV were both owned by Jeffrey Zeh, son of the former owner of Alpine. JV had bought six pieces of equipment from Alpine, which it leased to RWI for use in service to RWI customers, most of which were former customers of Alpine.

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In its decision, the appellate court cited the meaning of Federal Rule of Civil Procedure 25(c), which “allows the substitution of parties if an ‘interest’ is transferred, but relies on other substantive law to define interest.” While normally, a corporation purchasing the assets of another corporation does not assume the obligations of the transferor, there are exceptions, including one that “has developed in the context of ERISA actions, like this one, to recover delinquent pension fund contributions,” the appellate court said, citing Upholsterers’ Int’l Union Pension Fund v. Artistic Furniture of Pontiac as a precedent.

The appellate court explained that the ERISA test allows for plaintiffs to sue the successor companies if “(1) the successor had notice of the claim before the acquisition and (2) there is substantial continuity of operation of the business before and after the sale.” The appellate court determined that Robert Zeh's attestation that his son (Jeffrey Zeh) would know more about Alpine's operations than he did was proof enough that Jeffrey had notice of the claim. In addition, it rejected the defendants’ claim that the three companies—Alpine, RWI and JV—were isolated business entities because the facts showed the companies had “similar leadership, employees, customers, office space, equipment and services.”

As for the defendants’ claim that the Rule 25(c) motion was granted without a hearing, the appellate court cited Pinkston v. Madry, saying that the defendants did not “identify what they believe would have been revealed on cross-examination, what questionable evidence there was, or what credibility determinations needed to be made.” As such, said the appellate court, it was within the district court’s discretion to “resolve the Rule 25(c) motion…without an evidentiary hearing.”

Alpine Irrigation Company closed in 2009. Prior to this, it was in arrears on pension fund payments to the Chicago Journeyman Plumbers Union. The union filed suit to recover these funds. To enforce a judgment against Alpine, James Sullivan, the union’s trustee sought to discover Alpine’s assets.

That's when he discovered RWI and JV had been created in tandem with Alpine’s closing, and filed suit for the pension liability.

The full text of the court document can be found here.

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