Employer pensions and 401k plans in the United States are governed by ERISA which imposes a fiduciary duty on those that manage the plans. The purpose of the U.S. Employee Retirement Income Security Act (ERISA) includes “establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001.
ERISA’s employee protections cover defined “employee pension benefit plans” and “pension plans.” These plans are defined in 29 U.S.C. § 1002(2)(A) as:
“…any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund or program –
(i) provides retirement income to employees, or
(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.”
The Fourth Circuit addressed the elements necessary to meet these definitions in Elmore v. Cone Mills Corp, 23 F.3d 855 (4th Cir.1994). The Court discussed that an informal plan could fall under ERISA’s requirements if it met the elements set out by the Eleventh Circuit in Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir.1982): “if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.”
Intent to create an ERISA pension plan by the employer is not required under the ERISA statute. As stated by the D.C. and Ninth Circuits: “Because ERISA’s definition of a pension plan is so broad, virtually any contract that provides for some type of deferred compensation will also establish a de facto pension plan, whether or not the parties intended to do so.” Kenney v. Roland Parson Contracting Corp., 28 F.3d 1254, 1257 (D.C. Cir., 1994), quoting Modzelewski v. Resolution Trust Corp., 14 F.3d 1374, 1377 (9th Cir.1994). Because intent is not required, certain mandatory participation by employees in LLC or corporate investment funds may be covered by ERISA, with its associated remedies.
29 U.S.C. § 1104 imposes a prudent man standard of care on administrators and managers of pension plans and requires that “a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and- (A) for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan.”
Pursuant to 29 U.S.C. § 1132(a)(1)(B), a civil action may be brought by a participant or beneficiary of an ERISA pension plan to recover benefits, enforce rights, or to clarify rights, and may further seek reasonable attorney’s fees. Pursuant to 29 U.S.C. § 1132(a)(3), a participant or beneficiary may bring a civil action to enjoin violations of ERISA, to obtain equitable relief, or to enforce any provisions of ERISA.
Employees or ex-employees who have suffered losses in their benefit plans or 401k plans due to breaches of fiduciary duty or fraud, and those that have been improperly denied access to their plan benefits, should speak to an attorney to understand their rights. The securities fraud lawyers at Greco & Greco, P.C. have extensive experience with claims of breach of fiduciary duty and securities fraud, including ERISA related claims. Please contact W. Scott Greco for a free attorney consultation
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