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Equitable Relief


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Assume a plan has terminated a few years back and all assets have been distributed. A former participant them comes around and asks for his benefit. If the participant filed suit, would a court award amounts in excess of the participant's benefit to compensate him for the loss of tax deferred nature of the benefit?

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1. "Equitable relief" refers to injunctions, temporary restraining orders, orders from a court for someone to do something or cease from doing something. It is available in a limited set of circumstances in which irreparable harm can result if relief is not granted.

2. You do not stipulate whether or not the participant received any benefit, and if not why not. I will assume that he received no benefit and should have received a benefit. Otherwise the claim would be thrown out anyway. Assuming no problems with finding fiduciaries, with the statute of limitations, laches, affirmative defenses, etc., the court would award damages and order the benefit paid with some allowance for interest from the time the benefit should have been paid until the date actually paid. This is "legal relief" rather than "equitable relief".

I don't understand what you mean by "the loss of tax deferred nature of the benefit" unless you are referring to the fact that the balance received may not be able to be rolled over into an IRA.

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1. "Equitable relief" refers to injunctions, temporary restraining orders, orders from a court for someone to do something or cease from doing something. It is available in a limited set of circumstances in which irreparable harm can result if relief is not granted.

2. You do not stipulate whether or not the participant received any benefit, and if not why not. I will assume that he received no benefit and should have received a benefit. Otherwise the claim would be thrown out anyway. Assuming no problems with finding fiduciaries, with the statute of limitations, laches, affirmative defenses, etc., the court would award damages and order the benefit paid with some allowance for interest from the time the benefit should have been paid until the date actually paid. This is "legal relief" rather than "equitable relief".

I don't understand what you mean by "the loss of tax deferred nature of the benefit" unless you are referring to the fact that the balance received may not be able to be rolled over into an IRA.

Good answers. Thanks.

I obviously need to attend an ERISA litigation seminar or two because I thought that equitable relief was the only kind of relief permitted under ERISA. Anyway, your assumptions about the facts are correct and I was referring to the fact that the payment can't be rolled over to an IRA. How about that? Would a court award any kind of payment for the loss of tax deferred growth?

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Randy: Is there no IRS authority that would allow a payment from an employer in this scenario on behalf of the terminated plan to be treated as a distribution FROM the plan for purposes of Section 402? There may not be, but there would be if I were king.

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Randy: Is there no IRS authority that would allow a payment from an employer in this scenario on behalf of the terminated plan to be treated as a distribution FROM the plan for purposes of Section 402? There may not be, but there would be if I were king.

Nothing I could find. If you're interested and have time check out PLR 200213032 (settlement amounts held in an escrow account are not eligible for rollover).

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1. I dont understand what the claim can be for if the plan has been terminated. A participant can only sue a plan if he has a colorable claim for benefits or if he is a participant. If the plan has been terminated years ago and the plan assets distributed and the plan terminated how can there be a claim for benefits since he is no longer a participant in the plan (since the plan no longer exists) and he has no colorable claim for benefits (becuase he can never participate again in the plan). How can a claim for benefits be filed against a plan that no longer exists?

2. What is the basis for the claim by the participant? Was he a missing participant at the time the plan was terminated who could not be located? Were his benefits forfeited under the plan because he could not be located?

3. If the claim is for a benefit under a DB plan why isn't the benefit payable by the PBGC under ERISA 4050?

4. how much is his benefit claim?

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1. I dont understand what the claim can be for if the plan has been terminated. A participant can only sue a plan if he has a colorable claim for benefits or if he is a participant. If the plan has been terminated years ago and the plan assets distributed and the plan terminated how can there be a claim for benefits since he is no longer a participant in the plan (since the plan no longer exists) and he has no colorable claim for benefits (becuase he can never participate again in the plan). How can a claim for benefits be filed against a plan that no longer exists?

2. What is the basis for the claim by the participant? Was he a missing participant at the time the plan was terminated who could not be located? Were his benefits forfeited under the plan because he could not be located?

3. If the claim is for a benefit under a DB plan why isn't the benefit payable by the PBGC under ERISA 4050?

4. how much is his benefit claim?

1. Is it really that easy, no plan so no claim? Are there other factors to consider or is that it?

2. It's a participant who's data was simply lost in the administration of the plan. Don't ask me how because I don't know.

3. Not a DB.

4. About $5,000.

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1. Who can the participant file a claim with? There is no plan administrator.

2. what happened to his 5K? was it allocated to other participants? It seems strange that if he had 5k as a liability on the plan's books that it would be overlooked on termination.

3.Has anyone verified from plan records that he had a 5k benefit that was not paid ?

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1. Who can the participant file a claim with? There is no plan administrator.

2. what happened to his 5K? was it allocated to other participants? It seems strange that if he had 5k as a liability on the plan's books that it would be overlooked on termination.

3.Has anyone verified from plan records that he had a 5k benefit that was not paid ?

1. The employer was the plan administrator and they're still around. Not good enough? If not, what would happen if the plan terminated and all assets were paid to a single participant. Would the other participants not have a claim because the plan was terminated and the assets were paid out? I'm not trying to be a smart @ss, just trying to understand.

2. The only thing I know about the $5K is that it didn't go to him.

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1. How can you have a plan administrator if the plan has ceased to exist? Your question is no different than the Q of whether a missing participant whose benefit was forefited under IRS regs because he could not be located is entitled to receive his benefit if he contacts the plan sponsor after the plan has been terminated and his payment is allocated to the other particpants.

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Bad cases make bad law. I'll admit to doing no research on the issues raised by mjb, or even reviewing part 5 of Title I of ERISA. However, I believe that most judges would find a way to provide a remedy for this "participant" under ERISA, even if a stretch application of ERISA is required to do so, whether it's a claim against the employer as a successor to the plan, or a breach of fid. respons. claim against the employer, or something or another. Absent a statute of limitations problem, this individual would win his or her case and collect the $5k. Whether he or she would get interest or the type of consequential damages described by Randy is another story.

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Jpod: If you read the cases summaries in benefits in the news you will see that many claims aginst plans are dismissed by judges as a wrong without a remedy because the scope of relief under ERISA is very narrow. For example, a claim against the plan administrator for the failure to provide information to an insurer which resulted in the employee being denied health benefits was a dismissed as a wrong without a remedy under ERISA. I am still looking for a case where a court awarded benefits to a participant who did not receive benefits prior to termination of a plan. I dont see how the fid of a terminated plan is liable to a beneficary for benefits due a missing participant whose benefits were forfeited because he could not located at the time the benefits commenced. Under your logic after a plan is terminated every participant and beneficiary of missing participants could file claims against the plan administrators, fiduciaries, employer, etc for benefits for which the plan administrator was unaware upon termination of the plan.

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mjb: Without attempting to comment on your points, let me just say that my impression from the previous posts by Randy is that this is not a "missing participant" case, but it is a case where the individual's participant status was not recognized until after the plan was terminated. If I am correct, I think the equities/sex appeal of this case are vastly different from those of a missing participant case.

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mjb: Without attempting to comment on your points, let me just say that my impression from the previous posts by Randy is that this is not a "missing participant" case, but it is a case where the individual's participant status was not recognized until after the plan was terminated. If I am correct, I think the equities/sex appeal of this case are vastly different from those of a missing participant case.

That's right. Not missing.

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why does it matter? If Plan a makes mistake in paying out benefits upon termination there is still no plan to file a claim against. There is no breach of fid duty because there is no loss to the plan. Need to find who received the 5k in participant's account before you can assess the liability issues, e.g. unjust enrichment. I stll dont understand how the data showing the particpant's 5k in benefits could disappear without creating an imbalance on the other side of the ledger, e.g. 5k in excess assets.

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mjb: Look at the forest, not just the trees. According to Randy, this individual should have been recognized as a participant with an account balance of $5k. He did not receive it, through no fault of his own. Most likely, it was due to the employer's error(s), or error(s) of the employer's agent(s). Would you advise the employer to spend money to defend his lawsuit? I would not; I can't tell you exactly why without research, but I know that I would not. My answer would not change if it was $50k, but if it was that much I would also suggest going after the person or people who received too much money.

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Folks:

A participant is defined as an employee or former employee.

It sounds like this person has a colorable claim to benefits, in that he, apparently, was not paid the $5,000 due to the contract's terms.

I'd say this colorable claim is pretty black and white.

Don Levit

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Don: I think mjb correctly observed that the really difficult issue here might be whether a proper defendant really exists. You can't address the standing issue until you can identify a cause of action and a proper defendant.

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