Court: Administrative Committee can be Sued in Distribution Dispute

>US District Judge James Zagel of the US District Court for the Northern District of Illinois ruled that the plan’s sponsor Tyco International Ltd., and the plaintiff’s former employer, Allied Tube & Conduit Corp., could not be named as defendants, however.

>The case, brought by James Strenk, revolves around the his withdrawal of funds from his employer’s deferred compensation plan due to what he labeled as an unforeseen financial emergency. Strenk asserted that each defendant had violated the Employee Retirement Income Security Act (ERISA) by refusing to waive the penalties incurred by such an action. For relief, Strenk requested that the penalties incurred be returned to him. The administrative committee, Tyco, and Allied had all asked for the suit to be dismissed.

>Because the plan’s administrative committee was “adequately intertwined” with the plan, it could be named as a defendant, Zagel ruled. The other defendants named were not intertwined, and were thus dismissed from the suit. Tyco, being the plan’s sponsor, only placed money in the plan and did not make administrative decisions, according to Zagel. Allied, Strenk’s former employer, was not substantially involved in the plan’s day-to-day administration to warrant it being named as a defendant.

>In his ruling, Zagel noted that although the US 7th Circuit Court of Appeals had repeatedly held only the plan entity accountable in recovering benefits, several federal courts had made exceptions for cases in which defendants are closely tied in which decisions made by the plan.

>The case is  Strenk v. Tyco Deferred Compensation Plan, N.D. Ill., No. 04 C 3822, 10/22/04 .