RK Misconduct Claim Not Appropriate for Federal Court

April 22, 2005 (PLANSPONSOR.com) - Just because a plan recordkeeper worked on a plan regulated by the Employee Retirement Income Security Act (ERISA), it does not give a dissatisfied client the right to sue the provider in federal court, a judge has ruled.

>US District Judge Cynthia Rufe of the US District Court for the Eastern District of Pennsylvania said that plaintiffs Milkis Enterprises and owner Howard Milkis did not seek “benefits due” them under an ERISA plan. Instead, Rufe said, Milkis alleged that recordkeeper Retirement Plan Consultants didn’t comply with Internal Revenue Service (IRS) regulations which required plans to adopt amendments mandated by the Economic Growth and Tax Reconciliation Act of 2001.

“The fact that Defendant provided its bookkeeping services to an ERISA plan, or that Plaintiffs’ claim mentions plan benefits, does not automatically bring this action within the ambit of ERISA preemption,” Rufe ruled.

>In addition, Milkis and Milkis Enterprises alleged that Retirement Plan Consultants failed to follow IRS regulations requiring that the third-party custodian who controlled the plan’s assets make required distributions to Milkis.

>According to the court, Milkis Enterprises eventually agreed with the IRS to pay $40,000 to prevent the revocation of the plan’s tax-qualified status. In addition, Milkis had a higher tax bill as a result of the delayed distribution of his benefits, according to Rufe’s opinion. Milkis and Milkis Enterprises alleged that they were damaged in the amount of $50,000 because of Retirement Plan Consultants’ negligent administration of the plan.

>Rufe ordered the case to be sent to state court for further proceedings.

>The opinion in Milkis Enterprises Inc. v. Retirement Plan Consultants, E.D. Pa., No. 04-5520, 4/19/05) is  here .