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J. Larry Savell, Chairman
Richard Maples, Co-Chairman
Iron Workers Mid-South Pension Fund
Zenith Administrators
2450 Severn, Suite 517
Metairie, Louisiana 70001-1926
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2002-06A
ERISA Sec. 404(a)
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Dear Messrs. Savell and Maples:
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This is in response to your letter on behalf of the Trustees of the Iron Workers
Mid-South Pension Fund (Trustees) requesting guidance concerning the application
of the fiduciary provisions of Title I of the Employee Retirement Income
Security Act of 1974 (ERISA). Specifically, you ask whether the Trustees
must adopt the delinquent contribution procedures set forth in a collective
bargaining agreement that conflict with the Trustees’ previously adopted
delinquent contribution procedures.
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You represent that the Iron Workers Mid-South Pension Fund (Fund) is a jointly
administered Taft-Hartley defined benefit plan that receives its funding, in
part, through employer contributions. You represent that the Fund was
initially created in 1964, pursuant to collective bargaining between labor and
management, with labor and management as settlors of the initial trust
agreement. Seven iron workers local unions participate in the Fund
pursuant to collective bargaining agreements entered into between the local
unions and employers. The collective bargaining agreements of two employer
associations, the Oklahoma Commercial and Industrial Builders and Steel Erectors
Association (OCIBSEA) and the Mid-South Erectors Association (MSEA), contain
language requiring the payment of contributions to the Fund. The OCIBSEA
consists of employers within the geographical jurisdiction of Iron Workers Local
Union Nos. 48 and 584. The MSEA includes employers within the jurisdiction
of Iron Workers Local Union Nos. 58, 469, 591, 623 and 710. The members of
these employer associations negotiate with the unions on various issues relating
to the employment of iron workers within the unions’ jurisdiction. The
employer associations act as the bargaining representatives of employers who
subsequently sign either an attachment to the collective bargaining agreement or
a short form agreement, which binds them to all provisions contained in the
collective bargaining agreement, or a fund participating agreement, which only
binds the employer to those provisions in the collective bargaining agreement
relating to fringe benefit contributions. The union negotiators act as
bargaining representatives for those represented by the union.
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You represent that the employer associations select employer representatives to
serve as trustees of the Iron Workers Mid-South Pension Fund. These
employer trustees sign the Iron Workers Mid-South Pension Fund Trust Agreement
(Trust Agreement) on behalf of the employers they represent and in their
capacity as employer trustees. The business agents for each of the local
unions that participate in the Fund sign the Trust Agreement on behalf of the
unions and in their capacity as union trustees.
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You represent that the Trust Agreement grants to the
Trustees the power to “assess against a delinquent employer a substantial
amount as liquidated damages, together with an additional amount as interest,
such amounts to be fixed by the rules, regulations or resolutions promulgated by
the Trustees and as amended by them from time to time” (section 5.6 of the
Trust Agreement). You further represent that the Trustees have adopted
delinquent contribution procedures with respect to the Fund (Delinquent
Contribution Procedures). The Fund’s Delinquent Contribution Procedures
provide, in part, that any employer who has failed to pay its contributions to
the Fund by the first day of the third month following the work month shall be
required to pay liquidated damages of 10 percent of the total amount of the
delinquent contributions. The Delinquent Contribution Procedures also
provide for the assessment of monthly interest against delinquent employers.
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According to your representations, the collective bargaining agreements are not
incorporated into the Trust Agreement or the plan document, but provisions in
the Trust Agreement reference the collective bargaining agreements with respect
to the amount and due date of employer contributions. You further
represent that the Trust Agreement may be amended only by a majority vote of the
Trustees.
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You represent that, pursuant to negotiations during 1999, OCIBSEA and Iron
Workers Local Unions Nos. 48 and 584 entered into a collective bargaining
agreement effective June 1, 1999 (Collective Bargaining Agreement). The
Collective Bargaining Agreement provides that penalties may not be assessed
against any delinquent employer, except in extenuating circumstances such as
habitual delinquent employers. The Collective Bargaining Agreement also
sets out the applicable interest to be assessed against delinquent employers and
provides for the assessment of daily interest against delinquent employers.
You represent that the five other participating unions defer to the Trustees on
issues of assessment of interest and penalties against delinquent employers, as
had Iron Workers Local Unions Nos. 48 and 584 prior to adoption of the
Collective Bargaining Agreement.
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You have requested guidance on whether or not the Trustees must amend the
Delinquent Contribution Procedures to adopt the delinquent contribution
procedures in the Collective Bargaining Agreement.
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The provisions of ERISA sections 402, 403, 404 and 405 are intended to, among
other things, provide a basis for certainty regarding the identity and
responsibilities of those parties involved in managing and operating the plan,
as well as each party's liability for mismanagement. In this regard,
Section 403(c)(1) of ERISA provides, in part, that the assets of a plan shall be
held for the exclusive purpose of providing benefits to participants in the plan
and their beneficiaries. Similarly, section 404(a)(1) of ERISA provides,
in part, that a fiduciary shall discharge his or her duties with respect to a
plan solely in the interest of the participants and beneficiaries and for the
exclusive purpose of providing benefits to participants and their beneficiaries. Sections 404(a)(1)(B) and (D) of ERISA
require plan fiduciaries, in discharging their duties to a plan, to act
prudently, and in accordance with the documents and instruments governing the
plan, insofar as such documents and instruments are consistent with the
provisions of Titles I and IV of ERISA.
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Section 402(a) of ERISA provides that every employee
benefit plan shall be established and maintained pursuant to a written
instrument. This instrument must provide for one or more named fiduciaries
who have authority to control and manage the operation and administration of the
plan. The named fiduciaries may be either named in the plan instrument or
chosen, through a procedure specified in the plan, by the plan sponsor. A
written plan is required so that every employee may, on examining the plan
documents, determine exactly what his or her rights and obligations are under
the plan. Also, a written plan is required so the employees may know who
is responsible for operating the plan. See Conference Report accompanying ERISA, H.R. Rep. No. 1280, 93rd Cong., 2d
Sess. 297 (1974).
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Section 405(c)(1) of ERISA provides, in part, that the named fiduciaries may
designate persons other than named fiduciaries to carry out fiduciary
responsibilities (other than trustee responsibilities) under the plan.
Section 405(c)(3) of ERISA defines “trustee responsibility” to mean any
responsibility provided in the plan’s trust instrument to manage or control
the assets of the plan, other than a power under the trust instrument of a named
fiduciary to appoint an investment manager in accordance with section 402(c)(3).
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Section 403(a) of ERISA provides, in part, that all assets of an employee
benefit plan must be held in trust by one or more trustees. The trustee(s) must
have exclusive authority and discretion to manage and control such assets, with
two exceptions: (1) when the plan expressly provides that the trustee(s) are
subject to the direction of a named fiduciary who is not a trustee, in which
case the trustees are subject to proper directions made in accordance with the
terms of the plan and not contrary to ERISA; (2) when the authority to
manage, acquire or dispose of assets of the plan is delegated to one or more
investment managers pursuant to section 402(c)(3).
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ERISA section 402(b) sets forth the requisite features of an employee benefit
plan. Section 402(b)(2) of ERISA requires plans to describe any procedure
for allocating responsibilities for operation and administration of the plan,
including any procedure described in section 405(c)(1).
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ERISA section 402(b)(3) provides that every employee benefit plan shall provide
a procedure for amending the plan and for identifying the persons who have
authority to amend the plan. As the Department has noted in Advisory
Opinion 97-03A (January 23, 1997), the primary purpose of this provision is to
ensure that every plan has a workable amendment procedure.
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It is the view of the Department that, when the trustees of
a jointly administered Taft-Hartley or other plan have established delinquent
contribution procedures pursuant to their authority under the terms of the trust
agreement, which trust agreement may be amended only by the trustees, the
delinquent contribution procedures set forth in a collective bargaining
agreement to which the trustees were not a party are null and void with respect
to the trust agreement not binding on the trustees. Whether or not the
employers who have signed the collective bargaining agreement are bound by the
delinquent contribution procedures in the trust agreement would depend on the
facts and circumstances and is beyond the scope of this letter. Instead,
such Trustees have a duty under section 404(a)(1)(D) of ERISA to act prudently
and, among other things, to adhere to all of the trust provisions, including the
delinquent contribution procedures, the documents and instruments governing the
plan so long as they such provisions are consistent with Titles I and IV of
ERISA.
Where the trust agreement and the collective bargaining agreement are in
conflict on collection procedures, the trustees would need to consider the
likelihood of being able to enforce their procedures against employers who have
agreed to different procedures in the collective bargaining agreement. We
also note that, when the terms of a trust agreement provide that the amount and
due date of contributions by employers to the trust are governed by collective
bargaining agreements, the trustees must act in accordance with the provisions
of the collective bargaining agreements setting forth the amount and due date of
employer contributions, so long as they are consistent with Titles I and IV of
ERISA.
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The Department has taken the position that plan trustees who are in a position
to collect contributions owed to a multiemployer plan but fail to do so could
violate section 404(a) of ERISA. (Advisory Opinion 78-28A, December 5,
1978). Moreover, in the preamble to Prohibited Transaction Exemption 76-1
(41 Fed. Reg. 12740 (March 26, 1976) at 12741), the Department stated that
fiduciaries of multiemployer plans who do not establish and implement collection
procedures which are reasonable, diligent and systematic may be found to be
engaging in prohibited transactions under section 406 of ERISA. See letter
to Bernard M. Baum from John J. Canary (September 3, 1997). In this
regard, the responsible plan fiduciaries should evaluate, in accordance with
their fiduciary responsibilities and based on all relevant facts and
circumstances, whether any particular delinquent contribution procedures are
appropriate in order to meet these objectives.
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We do not, however, express any views as to whether or not a trust agreement
could provide (or be properly amended to provide) that delinquent contribution
procedures are subject to collective bargaining or whether or not a trust
agreement could provide that an employer or employer association or a union has
the authority to amend the terms of the trust agreement.
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This letter constitutes an advisory opinion under
ERISA Procedure 76-1, 41 Fed. Reg. 36281 (Aug. 27, 1976). Accordingly, it
is issued subject to the provisions of that procedure, including section 10
thereof relating to the effect of advisory opinions.
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Sincerely,
Louis Campagna
Chief, Division of Fiduciary Interpretations
Office of Regulations and Interpretations
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