Judge Throws Out Unpaid Contribution Provision in Plan Document

A federal judge in Massachusetts has ordered the sponsor of a master plan to strike a clause in its plan documents relieving the trustee of the duty to collect unpaid employer plan contributions.

U.S. District Judge Douglas P. Woodlock of the U.S. District Court for the District of Massachusetts ruled that Employee Retirement Income Security Act (ERISA) Section 403 imposed the duty on a trustee to monitor and pursue unpaid employer contributions. A plan provision going against that obligation would be contrary to public policy and shouldn’t be allowed to stand, Woodlock asserted.

The ruling came in a U.S. Department of Labor suit against Plan Benefit Services, Inc., regarding the master plan servicing more than 1,000 individual workplace retirement plans. Under the master plan and trust, each employer adopted an individual retirement plan for its employees and deposited the required contributions in the master trust. The master plan sponsor was responsible for the master plan’s language; for amending the plan and trust documents; and for appointing and removing the trustee.

Woodlock said he performed a property rights analysis and concluded that ordinary notions of property rights include the right to collect unpaid contributions. The item doing away with the mandate to pursue unpaid contributions violated Section 410 of ERISA that voids such provisions if they are found to violate public policy.

The court ordered the section be removed from the plan documents.

The ruling is available here.