Delinquent Contributions

[Randy Watson]

According to Section 515 of ERISA, a pension fund can enforce the collection of delinquent contributions based on the terms of the collective bargaining agreement or the terms of the plan. What happens if those documents are inconsistent and there are no provisions within either stating which controls in the event of a conflict?

[Kirk Maldonado]

I think that the wording of section 515 is pretty clear that the obligation only has to arise under one of the documents; not both of them. Specifically, Congress used the disjunctive (or) rather than the conjunctive (and). Here is the statutory language:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

[Guest tintree73]

This may be a stupid question - but what if the employer cannot pay the contributions owed (e.g., the employer goes out of business or goes bankrupt) - do the plans then go after the officers and shareholders for some type of personal liability for the contribution amounts? I would think you would need some type of fraud for personal liability - but assuming that is there - couldn't the individual just go into bankruptcy himself/herself?

[Guest VinSzel]

The plain meaning of statutory language suggests the disjunctive, so if the CBA is silent and the Plan document is specific, I think the Plan can be successfully be enforced. However, silence is not conflict. If the Plan document directly conflicts with the CBA, you probabally can't ignore the conflict. Check out the UPS case in the Second Circuit. Once again, we see a question with no clear answer.

I think that the wording of section 515 is pretty clear that the obligation only has to arise under one of the documents; not both of them. Specifically, Congress used the disjunctive (or) rather than the conjunctive (and). Here is the statutory language:

Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement.

[Effen]

Tintree,

I'm not a lawyer so I don't know all the legalities, but from a practical basis, the funds generally file suit and try to collect all unpaid contributions. If a contributing employer goes bankrupt, they would become a creditor and collect a percentage like everyone else, although I’m not sure what priority they are assigned in the bankruptcy.

If it is a DB plan, the participants generally get the benefit based on their service, even though the employer never actually contributed any money. This becomes an actuarial loss and is spread among the other employers. If it is a DC plan, the participants may just be screw'd. Some funds create penalty delinquency funds which are used to make up the losses for participants. The accounts are funded through penalties assessed to delinquent employers. In other words, if an employer is late with a contribution, they are assessed a penalty. The penalty goes into a different fund and is used to pay the participants share for employers who don't pay.

[Kirk Maldonado]

Vince Szeligo:

Do you have a citation for the UPS case out of the Second Circuit? I did a bit of research and I couldn't find it.