Legal Update: Participants Not Allowed to Sue Trustees for Failure to Collect Employer Contributions

Posting by Larry Beebe, CPA

In Fox et. al. v. McCormick et. al., a U.S. District Court in the District of Columbia found that plaintiff participants in a multiemployer defined benefit plan could not sue the trustees of the plan for an alleged failure to collect unpaid employer contributions.

The plaintiff participants said the trustees knew about unpaid contributions, but failed to pursue reasonable collection efforts. The court said the plaintiffs had statutory standing to sue under ERISA, but the question was whether they also had standing to sue under the Constitution.

Ultimately, the court ruled that the participants did not have a constitutional right to sue because they could not show that the trustees “(mis)conduct…creates the risk of default by the entire plan.” In other words, they had the right to sue if their pension was at risk, but they could not show that risk existed so they could not sue.

For more details, click here for the court opinion.

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