Statute of Limitations on PBGC enforcement

[Flyboyjohn]

Big mess just fell into our lap:

DB terminated 12/31/2006, distributed incorrectly calculated lump sums August 2007, employer finally files PBGC 501 (without any EA involvement) November 2012, PBGC audits and notifies ER last month (May 2017) that lump sums were calculated incorrectly and substantial additional sums likely owed to participants (plus lost earnings).

Since it's been almost 10 years since the initial distributions and over 4 years since the filing of the 501 we're wondering if there's a statute of limitations that might save this client?

 

[My 2 cents]

Initial question:  Why should a way of saving the client be found at all?  Is this client deserving of salvation?  Aren't the shortchanged participants more deserving of the money that should have been paid but wasn't?

Side question:  Was an actuary involved at all?  How did the employer get to the point where a 501 was filed unless an actuary was involved in the 500 filing (i.e., an EA-S)?  Who was responsible for the bad lump sum calculations?

[david rigby]

Exactly!  Any possibility the PBGC made a mistake?  Get the actuary involved.

[Flyboyjohn]

As usual there's more to the story. Mess was created by father and brother of current business owner, both of whom died after the plan termination was started but before it was completed. Plus there was a "bad actor" financial advisor involved (since run out of town) and evidently no EA, at least none that can be identified. Plus there are no participant compensation records prior to 2002, etc.

Current owner is not interested in stiffing the participants but is just looking for some leverage in dealing with PBGC in negotiating a "best efforts" calculation of additional sums due.

[Peter Gulia]

For a fiduciary-breach claim, ERISA § 413 states a statute of limitations and a statute of repose.

 

For a participant’s, beneficiary’s, or alternate payee’s claim for a benefit, ERISA’s text specifies no limitations period, but courts have invented Federal common law.  Courts’ interpretations vary widely.  Many try to follow the court’s perception of some relevant State’s limitations period for a claim under a written contract.

 

Also, a court might apply a limitation stated in the plan’s governing document.

 

Different law applies for the PBGC’s claims against an employer.

 

If anyone is considering arguing a statute-of-limitations defense or a statute-of-repose defense, even as a negotiating tactic, that person should lawyer-up.

 

[david rigby]

Absolutely, the S-O-L question should be addressed to the attorney.

However, w/r/t the Enrolled Actuary, the sponsor can either (1) hire another EA to look at it, or (2) pay up per PBGC proposed solution.  No records prior to 2002 could be a problem, but the (new) EA will review based on whatever data the PBGC had.  Note that hiring another EA might not mean reviewing every participant, perhaps only a sample.