Officers Liable for Multiemployers Pension Contributions?

A growing number of multiemployer pension plans and welfare plans, which are common in the construction, transportation and retail food sectors, have modified plan or trust terms to make employer contributions which are due and owning but not paid “plan assets.” Although the due and owing amount is sitting in the company’s bank account awaiting disbursement along with other accounts payable, courts consider the amount due to be a “plan asset” if the plan or trust has a provision to the effect that amounts due and owing are plan assets.

As a plan asset, whoever in the company has the authority to make (or not make) the disbursement may be considered to be a fiduciary under ERISA. As a fiduciary, the person is personally liable for the amount which is due and owing to the fund. West Virginia Laborers’ Pension Trust Fund v. Owens Pipeline Services, ___ F.Supp.2d ___, Case No. 2:10-cv-00131 (S.D. WV Nov. 18, 2011).

Further, the bankruptcy of the company will not extinguish this personal liability and the personal bankruptcy of the individual may not discharge the obligation if the non-payment is considered to be a fraud or defalcation while acting in a fiduciary capacity within the meaning of Section 523(a)(4) of the bankruptcy code. The courts are divided on whether an individual who is a fiduciary under ERISA is also a fiduciary under the bankruptcy code. See, Trustees of Iron Workers v. Mayo,(In re Mayo), 2007 WL 2713064 (Bankr. D. Vt. Sept. 17, 2007), Bd. Trustees of the Ohio Carpenters’ Pension Fund v. Bucci, (In re Bucci), 493 F.3d 635 (6th Cir. 2007).

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Posted by Carl H. Hellerstedt, Jr. Mr. Hellerstedt is Counsel with Spilman Thomas & Battle, PLLC. His primary areas of practice are labor and employment and ERISA law.

Carl H. Hellerstedt, Jr.

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Cash in Lieu of Health Insurance? Word to the Wise

Many employers give their employees the option to receive cash if they opt out of the employer’s health insurance coverage. It is permissible to do so, but the option must comply with IRS rules.

Cash in lieu of benefits falls under the cafeteria plan rules of Section 125 of the IRC.  The employer must have a written cafeteria plan in place and the plan must have cash in lieu of the benefit coverage as one of its options. An employer cannot have cash in lieu of policy which is outside a cafeteria plan.

If the employer does not have a written cafeteria plan in place or if the employer’s cafeteria plan does not include the pay in lieu of coverage as one of its options, but the employer offers pay in lieu of coverage outside the plan, the IRS takes the position that all employees have the option to take cash or the benefit and that the employees who chose the benefit coverage and forego the cash will nevertheless be deemed to have received taxable wage income equal to the amount of the cash alternative. See, Prop. Treas. Reg. § 1.125-1, Q & A – 9; Private Letter Ruling 9406002.

In addition, the amount considered to be wages is subject to income tax withholding and FICA and FUTA payroll taxes. Further, the amount considered to be wages should be included in the employee’s “regular rate” for purposes of computation of overtime pay unless the criteria set out in the DOL Opinion Letter FLSA 2003-4 (June 2, 2003) are satisfied. Among the criteria are that the employee must show there is alternative coverage for the coverage being waived and no more than 20% of the employer’s contribution to the cafeteria plan can be paid out in cash. See, Madison v. Resources for Human Development, Inc. 39 F.Supp.2d 542 (E.D. Pa. 1999), vacated and remanded, 233 F.3d 175 (3d Cir. 2000); Prop. Regs at 72 Fed. Reg. 43939 (August 6, 2007).

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Posted by Carl H. Hellerstedt, Jr. Mr. Hellerstedt is Counsel with Spilman Thomas & Battle, PLLC. His primary areas of practice are labor and employment and ERISA law.

Carl H. Hellerstedt, Jr.

Pa. PUC Begins Enforcement of Portions of Act 13

[Note: This article was first posted here, in The Shale Play Today: August 2012.]

Despite the Commonwealth Court’s recent decision striking down Act 13’s limits on municipalities enacting zoning ordinances more restrictive than the state’s uniform requirements, the Pennsylvania Public Utility Commission (“PUC”) has begun enforcement of Act 13’s impact fee provisions. Specifically, the PUC has started to review some municipalities’ ordinances that seek to regulate drilling activity.

The results of the PUC’s reviews could prevent some municipalities from receiving their share of the new drilling impact fee this fall if PUC officials determine the municipal ordinances are out of compliance with Pennsylvania law. The provisions of Act 13 that were upheld give the PUC broad powers to enforce Act 13’s requirements. If a local ordinance is found to conflict with state law, municipalities would be ineligible for fee revenues until the ordinance is amended or the decision is reversed by the Pennsylvania Supreme Court. As such, the PUC is now attempting to distinguish which municipalities’ ordinances fall under the zoning section that was struck down, which might be inappropriate under the upheld provisions of Act 13, and which are in compliance. Complicating this process is whether the Pennsylvania Supreme Court will hear the appeal of the Commonwealth Court’s ruling on an expedited basis, as it is expected that the Supreme Court will take the appeal.

Lastly, the PUC has received several requests for advisory opinions from municipalities throughout Pennsylvania as to the scope and limits of the PUC’s power under Act 13. The PUC has not yet responded to any of the requests for advisory opinions nor are the advisory opinions binding on the municipalities. Thus, despite, the Commonwealth Court’s ruling, the PUC is moving full speed ahead with exercising its new authority under Act 13. This is evidenced by the recent report that the townships of South Fayette and Robinson, located in the southwest corner of Allegheny County, upon the written request of leaseholders, are having their drilling ordinances reviewed by the PUC. The PUC gives municipalities 20 days to file a response. The PUC then has 120 days to issue a ruling. The township’s impact fee revenues could be withheld until the PUC’s review is completed or the ordinance is revised.

Click here to read a recent news article on this subject.

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Posted by Kevin M. Eddy. Mr. Eddy is an associate with Spilman Thomas & Battle, PLLC. His primary area of practice is litigation, with an emphasis on the transportation, construction, and oil and gas industries.

Kevin M. Eddy