MultiEmployer 401(k) Plan

[Guest Stephanie G]

MultiEmployer Plan with over 300 employer groups. Each Employer forwards payroll information and deferrals on a monthly basis to the recordkeeping company. Who is liable if an individual employer does not send the deferral money in within the required time period? When answering the question on Form 5500 regarding late deposits, is it the "Plan" that is late or the individual employer. Should the plan send delinquency notices to the employers.

[Guest bswift]

Steph - the trustees of the multiemployer plan should send out a late notice - there is also typically a fixed penalties for late payments. its also a prohibited transaction that the individual employer is responsible for reporting on a form 5330. hope that helps.

[Guest Dan Ashley]

Question 1.

PT Exemption 76-1 explains that the fiduciaries of a multiemployer plan (e.g. the Trustees) have

a fiduciary duty to collect the delinquent contribution. Notices, late fees, and suing the delinquent

employers are required. A written policy should be in place setting forth the policy, and the

trustees should receive periodic written reports from the multiemployer fund office, (and for

cases where the fund office has not been able to collect, from the collection attorneys) to

demonstrate they have complied with their fiduciary duty in a reasonable matter. Failure to

comply with these principles is 1) a fiduciary breach by the trustees, and possibly a fiduciary

breach by any co-fiduciaries if they know of the breach but fail to correct it, and 2) possibly a

prohibited transaction to the extent that the IRS or DOL could argue there essentially exists an

illegal possession of plan assets by the delinquent employer or an illegal extension of credit from

the plan to the employer by reason of a failure to take reasonable measures to collect the debt. Liability can extend, in some cases, to the entity which appointed the trustees.

Question 2.

What 5500 question are you talking about? I’m looking at a multiemployer 5500 right now. Are

you talking about 31 b which asks about receivables on the balance sheet?

Question 3.

Yes, a plan of this size should probably send the initial delinquency notices to the employers. It may not be prudent to spend money on collection attorneys for the initial notices. The answer may be different with a small multiemployer fund with inadquate staff to send out the notices, or where experience demonstrates that the particilar employers in question simply ignore delinquency notices from a non attorney. Note that ERISA provides for recovery of liquidated damages from the delinquent employer, as well as attorneys fees.

Hope this helps.

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Dan Ashley

Ogletree Deakins Murphy Smith & Polk

dan.ashley@odnss.com