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offset of participant's benefit


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5 replies to this topic

#1 JBeck

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Posted 14 December 2000 - 09:45 AM

Self employed employer contributes to a multiemployer pension fund. The fund gets a judgment for past contributions against the employer personally. The self employed employer also participates in the plan. Can the fund get around the assignment and alienation provisions of ERISA and set off the participants benefit?
jpb

#2 Bill Ecklund

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Posted 15 December 2000 - 02:44 PM

You may not offset. See Guidry V. Sheet Metal Workers National Pension Fund, 11 EBC 2337, a U.S. Supreme Court Case dated 1/17/90

#3 KJohnson

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Posted 15 December 2000 - 04:17 PM

As I recall, in Guidry, the Union obtained the judgment for amounts embezzled from it and the Plan did not have a judgment. The Supreme Court stated that ERISA's anti-alienation provisions did not allow the Union to reach amounts payable from the Plan to satisfy a judgment for the Union. I think it is a much closer call when the Plan has the judgment. For example, a Plan can offset past benefit overpayments against future benefit payments.

Also, a number of multiemployer plan trust agreements (as well as collective bargaining agreements) are being written so that delinquent contributions become plan assets as soon as they are "due and owing". Obviously, for employee contributions DOL already takes the position that these are Plan assets after, at the latest, the 15th business day following the month that the employee would otherwise receive those amounts. Some plans are therefore suing delinquent corporate owners, personally, as fiduciaries for failure to remit plan assets.

I believe that Congress specifcially amended 401(a)(13) to allow offset in the case of a judgment for fiduciary breach.

That said, someone could argue that the amendment to 401(a)(13) is specific so that Congress meant to disallow an offset for anything other than a judgment for fiduciary breach (such as a failure to make contribuitons pursuant to ERISA Section 515).

Finally, unless the Plan used the fiduciary theory, I assume the employer was unincorporated and that is why the Plan was able to obtain a personal judgment. I am not sure your owner would even be entitled to benefits from a multiemployer plan based on periods of service where he was unincorproated because of Section 302©(5) of Taft-Hartley 29 U.S.C 186©(5). DOL issued an opinion letter on this several years ago but only adressed the ERISA aspects and specifically refused to reach the Taft-Hartley issue.

#4 Bill Ecklund

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Posted 16 December 2000 - 02:36 PM

Guidry had embezzled money from his union and from two local plans (pension and health & welfare) that he was a trustee of. The issue before the Supreme Court was whether a constructive trust could be imposed upon his pension benefits to satisfy the Union's judgement. The court determined that a constructive trust could not be imposed. However in the lower court, two of the three pension plans that he was entitled to receive benefits from had argued that Guidry has forfeited his rights to his pension benefit. The District Court ruled that he had not, but that a contructive trust could be imposed. Following the loss of the Supreme Court case, the Union then waited until Guidry actually received his pension check and then garnished that. That started a whole new round of cases with Guidry arguing that the anti-alienation provisions of the law also applied to that intended garnishment. Guidry lost that case. The matter was appealed to the 10th Circuit, Guidry lost again and the U.S. Supreme Court refused to grant cert. An interesting twist was the fact that Colorado's garnishment laws were found not to have been preempted and those laws currently do not allow the garnishment of pension benefits.

I don't think that the exception provided in 401(a)(13)© (which references violations of Part 4 of subtitle B of title I) will work in your case. That only applies to breaches of fiduciary duty and your contributing employer is not a fiduciary to the plan. In addition, failing to make contributions is a violation of ERISA section 515, which is not part of part 4, it is part of part 5.

One suggestion would be to check ou the garnishement laws of your state, and have the sheriff show up every time a pension check is delivered.

#5 KJohnson

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Posted 17 December 2000 - 03:38 PM

I thought Guidry had worked out a "deal" to repay the Plans. Was the Plan's right to an offset ever an issue above the District Court level? Also, you might want to look at a couple of other cases like PBGC v. Solmsen a District Court case out of N.Y. sometime in the late 80's or early 90's and a case called Coates (sp.?) v. Kazmir out of the Third Circuit and Parker v. Bain out of the Ninth. In think both of these decisions were in the '93-'96 time period. I believe that Coates distinguished Guidry on the Plan/Union issue. However, my recollection is that all of these were fiduciary breach cases. The right to offset for a fiduciary breach is now statutory.

I agree that the statutory 401(a)(13) theory probably would not work unless you had a judgment for fiduciary breach. However, as I noted in my prior post, a number of multiemployer funds are using fiduciary breach theories to impose personal liability for failure to make contributions to the plan. A number of the cases hinge on a Trust or a collective bargaining agreement containing language that make "due and owing" contributions plan assets (and therefore whoever controls those plan assets a fiduciary) but I think there was a case out of a California District Court in the last year that did not even require such langauge to hold that a corporate officer breached his fiduciary duty by failing to make contributions to a multi.

Finally, I know some large multiemployer funds now "require" direct deposit of pension checks. If that is the case, the Plan could simply garnish the bank account every time after payment. Of course I am not sure that this requirement of direct deposit has ever been tested.

#6 Bill Ecklund

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Posted 18 December 2000 - 10:08 AM

Guidry had worked out a deal with the Local 9 plan which he had embezzled from, but he was a beneficiary of two other plans, the Business Agents and Councils Plan and the National Pension Fund Plan. He didn't owe them any money. These two plans argued that by his "bad boy" acts he had forfeited his right to a pension benefit, or in the alternative a "constructive trust" should be imposed on his benefit. The District Court rejected the forfeiture argument, but accepted the constructive trust theory as did the Circuit Court. The Supreme Court "acknowledged" that the forfeiture theory didn't work and also rejected the constructive trust theory.