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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
A district court has the power under ERISA to authorize the court-appointed independent fiduciary of a troubled defined contribution plan to terminate the plan, the U.S. Court of Appeals in Richmond (CA-4) has ruled in Solis and Clark Consulting v. Malkani.
Removal of fiduciary
In an earlier opinion, the Fourth Circuit affirmed the district court's removal of a plan administrator. The administrator, who was sole owner of the employer, had refused to make required contributions to the defined contribution plan, retroactively denied employees their vested benefits, and attempted to raid the plan's assets in order to cover the company's administrative expenses.
Following the decision, the district court granted a Labor Department motion and named an independent fiduciary. A magistrate judge subsequently determined that the employer owed the independent fiduciary nearly $500,000 in fees and costs. Rather than object to this ruling to the district court, the employer again appealed to the Fourth Circuit, which dismissed the appeal.
In due course the district court upheld the fee award, whereupon the independent fiduciary asked the court to permit it to withdraw. The court granted the request, and appointed a second independent fiduciary. The court gave the second fiduciary exclusive power to terminate the plan. Once again, the employer appealed.
Powers of independent fiduciary
The appellate court rejected the employer's contention that the district court abused its discretion when it authorized the independent fiduciary to terminate the plan. Federal courts may exercise broad equitable powers when implementing remedial decrees under ERISA. ERISA §409(a) authorizes courts to remove fiduciaries, while ERISA §502(a)(2) and 502(a)(5) authorize other "appropriate relief" where necessary. Thus, in "narrow circumstances," courts may authorize an independent fiduciary to terminate the plan. (The plan in question is "nearly dormant," the court explained, with only seven of 309 participants remaining active.)
Fee award stands
The employer lost its chance to dispute the magistrate's fee award when its lawyer failed to file objections to the award with the district court within ten days, as the governing statute clearly required. The employer's legal counsel should have understood the consequence to the client of failing to act within the 10-day window.
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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