Benefits and Compensation

Ruling Underscores Limits to Plan Participant Remedies

Sometimes an employer may delay transfers of payroll deductions to employees’ retirement accounts. That’s a breach of fiduciary responsibility, but a recent decision by the U.S. District Court for the District of Massachusetts may offer them some comfort.

Managing retirement plan administration can be a burden for busy small business owners who aren’t financial professionals. Ensuring that payroll deductions are transferred to employees’ retirement accounts in a timely manner is a critical part of the plan administrator’s fiduciary role.

Occasionally, such transfers are missed or delayed for inappropriate reasons, including misallocation of funds by small business owners strapped for cash. Despite this serious breach, the recent decision in Altshuler v. Animal Hospitals, Ltd., 1:11-cv-10901-RGS, (D. Mass. Oct. 31, 2012) again validated the stance that employees subjected to plan contribution gaps have limited access to legal remedies beyond reimbursement under ERISA.

Facts of the Case

In Altshuler , the plaintiff was a veterinarian who worked for Christopher Meehl, who ran a small animal hospital with four doctors and a full-time staff of fewer than 20 in Lynnfield, Mass. The plaintiff, known as Dr. Jennifer Usiak professionally, was hired as a relief vet in 2007 and became a full-time employee later that year. In April 2009, Usiak elected to participate in a Simple IRA retirement plan sponsored by her employer.

At the beginning of 2011, Usiak discovered that the company had deposited into her IRA only 65 percent of the money withheld from her pay in 2010, and that the contributions for September, October and November of that year were overdue. She questioned Meehl, the company’s president and plan trustee, about the delayed employee contributions, who admitted to cash-flow problems amid the recession. Usiak then withdrew from the retirement plan.

After another confrontation over his failure to fully remit her contributions to the plan, the company made all missing payments to Usiak’s IRA, with interest. Then the animal hospital’s president terminated Usiak’s employment, stating in his termination letter that her allegations about delayed contribution payments and his plan mismanagement were the basis of her firing.

The plaintiff then sued, alleging that the company and Meehl violated ERISA by breaching their fiduciary duties, disrupting her benefits and retaliating against her for complaining. She sought: (1) compensatory damages; (2) the 3-percent matching contributions she was due had she stayed in the plan longer and become vested; and (3) relief for other participants in the plan whose accounts were also affected. Both Usiak and Meehl filed motions for summary judgment in the matter.

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