Trustees of multiemployer pension fund did not act as fiduciaries when they amended the plan

Trustees of a multiemployer pension fund did not act as fiduciaries when they amended the plan and, thus, participants’ and beneficiaries’ claims that certain plan amendments breached the trustees’ fiduciary duties were properly dismissed, according to the U.S. Court of Appeals in New York City (CA-2).

Background

Former and present participants and beneficiaries of multiemployer pension and welfare funds brought suit on behalf of the funds against former and present trustees and plan managers, seeking to recover assets that the participants and beneficiaries contended were wrongfully taken from the funds by two plan managers in violation of their fiduciary duties. Counts I-V alleged that various plan amendments breached the trustees’ fiduciary duties.

The district court granted the trustees’ and plan managers’ motion to dismiss, but rejected their alternative claim that Counts I-V did not allege actions that fell within the scope of ERISA’s fiduciary duty statute and, thus, failed to state a claim on which relief could be granted. Counts I-V were later dismissed as time-barred.

Both sides appealed the district court’s decisions. The participants and beneficiaries challenged the time-bar rulings. The trustees and plan managers disputed, in light of subsequent U.S. Supreme Court decisions, the continued validity of the appellate court’s rulings in Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2nd 1032 (1985), which concluded that trustees of a multiemployer pension plan act as fiduciaries when they amend a plan, and the language in Siskind v. Sperry Retirement Program, Unisys, 47 F.3d 498 (1995), which distinguished multiemployer pension plans from single-employer pension plans and determined that amending a single-employer pension plan was not a fiduciary function.

Amending a multiemployer plan is not a fiduciary act

The appellate court considered the trustees’ contention that the dismissal of Counts I-V should have been affirmed because the actions involved were pension plan amendments, which are not fiduciary activities, and, therefore, did not violate ERISA §404(a)(1). The appellate court noted that it decided in the Chambless case that the act of amending a multiemployer pension plan should be treated as a fiduciary function, which brought the act of amending the plan under the requirements of ERISA §404(a)(1). Pursuant to ERISA §404(a)(1), a plan fiduciary must act solely in the interests of the plan participants and beneficiaries. In Siskind, the appellate court ruled that amending a single-employer pension plan was not a fiduciary act, distinguishing Chambless. The trustees contended that these decisions were abrogated by the combined effect of the U.S. Supreme Court’s rulings in Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995), Lockheed Corp. v. Spink, 517 U.S. 882 (1996), and Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999).

Although the Supreme Court cases all involved single employer plans, the appellate court agreed with three other circuit courts that the Supreme Court’s language analyzing fiduciary duties under ERISA equally applied to multiemployer plans. The appellate court noted that the other circuit courts—the Third, Sixth, and District of Columbia—had determined that the fiduciary duty requirements under ERISA were not applicable to the act of amending multiemployer plans and that nothing in ERISA or the Supreme Court’s decisions created an exemption for multiemployer pension plans. Although the appellate court felt that it was a close question as to whether the Supreme Court’s language should have been considered holdings or highly persuasive dicta, the appellate court concluded that the language was ample justification to deem the Chambless and Siskind cases abrogated with respect to multiemployer plans.

Therefore, the appellate court held that Counts I-V were subject to dismissal because the trustees were not acting as fiduciaries when they amended the plan.

Source: Janese v. Fay (CA-2).

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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