ERISA-Ninth Circuit Holds That Employers’ Unpaid Contributions To Employee Benefit Funds Are Not Plan Assets, Even If the Plan Documents Label Future (Unpaid) Contributions As Such, So That The Failure By The Employer To Pay Is Not An ERISA Fiduciary Viol

In Bos v. Board of Trustees, No. 13-15604 (9th Cir. 2015), the Ninth Circuit Court of Appeals (the “Court”) was asked to decide whether an employer’s contractual requirement to contribute to an employee benefits trust fund makes it a fiduciary of unpaid contributions under ERISA.

In this case, beginning in 2007, Gregory Bos was owner and president of Bos Enterprises, Inc. (“BEI”). BEI was a member of the Modular Installers Association, an employer association. As president of BEI, Bos agreed that BEI would be bound by the Carpenters’ Master Agreement, and several trust agreements. The Carpenters’ Master Agreement required each employer–including BEI–to contribute monthly payments based on hours of work to the trust funds (the “Funds”) for the purpose of providing employee benefits. Each trust agreement defined its respective fund as including “all contributions required by the [Carpenters’ Master Agreement]. . . to be made for the establishment and maintenance of the [respective plan], and all interest, income and other returns of any kind.”

Bos personally had full control over BEI’s finances, as well as authority to make payments on behalf of BEI, whether to the Funds or to other creditors. Thus, Bos was personally responsible for making the required contributions to the Funds on behalf of BEI. However, he failed to make certain required contributions. In an action by the Funds to collect the unpaid contributions, the issue arose as to whether, because the trust agreements defined the Funds as including contributions “required . . . to be made” to the Funds, the unpaid contributions were plan assets, so that Bos-who had control over BEI’s funds-had liability as an ERISA fiduciary for the nonpayment of the contributions.

In analyzing the case, the Court held that an employer’s unpaid contributions to employee benefit funds are not plan assets, even if the plan document expressly defines the fund to include future payments. This result applies, and is in accord with decisions in the Sixth and Tenth Circuits, even though the Second and Eleventh Circuits have held for or at least recognized a contrary result. Under the Court’s holding, Bos did not control plan assets, and thus had no fiduciary duty under ERISA to remit any of BEI’s assets to the Funds. The case was decided in the context of Bos’s filing for bankruptcy, and has implications for bankruptcy situations as well as ERISA cases.

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