A company owner and another manager are not fiduciaries as defined by ERISA and the contributions they failed to make to their employees’ pension plans were not plan assets, the 6th U.S. Circuit Court of Appeals ruled. This decision supports the premise that individual company officials who serve only as conduits for employees’ payments to retirement plans are not ERISA fiduciaries and, as such, are not personally liable for unpaid plan contributions. The case is Sheet Metal Local 98 Pension Fund v. AirTab Inc., Case No. 09-3121 (May 29, 2012).
The court affirmed an earlier decision by the U.S. District Court for the Southern District of Ohio that found in favor of the company. The district court judges did not define nonpayment of a plan contribution as an exercise of control over disposition of the plan’s assets.
The plaintiffs, two union retirement funds for sheet metal workers, sued AirTab Inc. of Ohio, its president and owner and a “coordinator” at the company for failing to make contributions to the funds as required by a collective bargaining agreement between the company and Sheet Metal Workers Local 24. The union fund trustees asserted breach of fiduciary duty and breach of trust against the company officials as individuals. They maintained that the AirTab officials were personally liable for the unpaid contributions because they were fiduciaries under ERISA, and under the terms of the CBA, the unpaid contributions constituted plan assets.
The company officials’ key argument was that they could not be held personally liable for the unpaid contributions because they were not fiduciaries as defined by ERISA and the contributions were not assets of an ERISA plan.
The 6th Circuit referred to U.S. Code Title 29, Section 1002 in reaching its conclusion that the AirTab officials were not fiduciaries: “A person is a fiduciary … to the extent that he or she ‘exercises any discretionary authority or control respecting management or disposition of its assets, … [or] has any discretionary authority or discretionary responsibility in the administration of such plan.’“
For additional information about ERISA fiduciary duties, see Thompson’s employee benefits library including the 401(k) Handbook.