Director and Officer Liability under ERISA

Under ERISA, ”employers” must make all necessary contributions to multi-employer pension plans pursuant to the plans’ terms or the terms of a collective bargaining agreement. Every employee benefit plan must have a funding procedure and fully explain how and under what circumstances payments are to be made to the plan. If these responsibilities are not carried out or carried out in an untimely manner, a civil enforcement action can be brought against the plan or the employer. An “employer” is defined as “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.
Generally, a corporate director or officer will not be held personally liable for the company’s failure to make the required contributions because they are not usually considered as falling within the statutory definition of “employer.” There are notable exceptions. Personal liability has attached to an officer or director in the following circumstances: (1) the evidence showed that the officer or director defrauded the plan or conspired to defraud the plan of the required contributions and (2) the corporate veil was pierced because the officer or director acted as the company’s “alter ego.” Piercing of the corporate veil may be warranted when corporate formalities are not observed. Sloppy or inadequate record keeping may also justify piercing of the corporate veil. Use of corporate funds and assets for a director’s or officer’s personal benefit or to further a fraud or other wrongful activity may also expose the officer or director to personal liability.

ERISA did not totally preempt the field in the area of employee benefit plans. Thus, state laws may be another basis for imposing personal liability upon an officer or director for failing to make the required plan contributions.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.