EBSA: Responsibility for Collecting Contributions Must be Properly Assigned

February 1, 2008 (PLANSPONSOR.COM) - Federal regulators have released new guidance that asserts that a named or functional fiduciary that has authority to appoint a plan's trustee(s) must make sure the proper party has been assigned the obligation to collect plan contributions.

A news release from   U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) affirmed that stance,  unless the plan expressly provides that the trustee will be a directed trustee with respect to contributions pursuant to section 403(a)(1), or the authority to collect contributions is delegated to an investment manager pursuant to section 403(a)(2). The viewpoint was expressed in Field Assistance Bulletin (FAB) 2008-01.

Collection Responsibility

The responsibility for collecting contributions is a trustee responsibility,” the regulators wrote in the FAB. “If a plan has two or more trustees, the duty may be allocated to a single trustee. A plan may also provide that a named fiduciary may direct a trustee as to this responsibility or may appoint an investment manager to take on this duty. To the extent the nature and scope of the trustee’s responsibilities are specifically limited in the plan documents or trust agreement, it is generally the responsibility of the named fiduciary with the authority to hire and monitor trustees to assure that all trustee responsibilities with respect to the management and control of the plan’s assets (including collecting delinquent contributions) have been properly assigned to a trustee or investment manager.”

If no trustee or investment manager has the responsibility to make sure plan contributions are collected in a timely manner, the fiduciary with authority to hire the trustees may be liable for plan losses due to a failure to collect contributions because the fiduciary failed to specifically allocate this responsibility, according to the FAB, which is published to provide guidance and assistance to Department investigative staff in the “field.”

According to the news release, the FAB was prompted by a number of plan investigations that have turned up trustee agreements relieving the financial institutions serving as trustee of responsibility to collect delinquent contributions and that the responsibility was not properly assigned to someone else.

The FAB is  here .