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Elements of Proof for 29 U.S.C. 1131 and ERISA Obligations

The following materials have been prepared in part by the Labor-Management Unit of the Organized Crime and Racketeering Section (202) 514-3666 and published in Criminal Case Prosecutions Involving Employee Benefit Plans: Prosecutor's Guide (United States Department of Labor, Pension and Welfare Benefits Administration, 1994). In order to establish a violation of 29 U.S.C. § 1131, the government must allege and prove the following essential elements: The jurisdictional entity involved is an employee benefit plan within the meaning of Title I of ERISA (29 U.S.C § 1001 et seq.) The violator had an obligation pursuant to ERISA. Under section 1131, "any person," refers to a person who has an obligation to comply with the reporting and disclosure provisions of part I, Title I of ERISA (29 U.S.C. § 1021). Generally, the person who has such an obligation is the "administrator," who is the person specifically designated in the plan documents, or if not designated, the administrator would be the sponsoring employer or employee organization or both (plan sponsor). The terms "administrator" and "plan sponsor" are defined in section 3(16) (29 U.S.C. § 1002 (16)). Also included, are persons required to certify information, such as an insurance carrier or bank, as specified in section 103 (29 U.S.C. § 1023). The defendant willfully violated Title I, Part I, ERISA. Section 1131 punishes anyone who "willfully violates" a statutory reporting or disclosure requirement in ERISA or regulation or order issued under those statutory provisions. In United States v. Phillips, 19 F.3d 1565 (11th Cir. 1994), aff'd sub nom. USX Corp. v. United States, 115 S.Ct. 1312 (1995), the corporate sponsor of an employee pension plan was convicted of having willfully caused the plan administrator not to furnish plan participants with a summary description of a material modification in the terms of the plan as required by ERISA, namely, changes in the rules of eligibility for pension credits due former corporate employees who had become labor representatives. On appeal the defendant challenged the court's instruction to the jury that it need only find that the defendant had "knowingly and intentionally committed the acts which [violated Part 1 of ERISA] and . . . were not committed accidentally or by some mistake." Id. at 1583. Rejecting the defendant's claim that the jury should have been instructed that section 1131 requires a "specific intent to do something the law forbids; that is with bad purpose to disobey or disregard the law," the court upheld the trial court's instruction that section 1131 requires only a general intent and knowledge of one's acts. In construing section 1131, the court in Phillips reasoned that the ERISA misdemeanor does not require proof of a specific intent to violate the law because the statutory defense codified at 29 U.S.C. § 1028, based on good faith compliance with Department of Labor regulations, would be redundant if "willfully" required such specific intent and would, in effect, render the "willfully" in section 1131 "meaningless surplusage." Id. at 1584. See also United States v. Tolkow, 532 F.2d 853 (2d Cir. 1976), upholding the conviction of a plan trustee for having "knowingly" failed to report required party-in-interest transactions in the plan's annual financial report under ERISA's predecessor, the Welfare and Pension Plans Disclosure Act, in violation of 18 U.S.C. § 1027. Rejecting the assertion that section 1027 required proof of a specific intent to violate the law and actual knowledge of the reporting obligations, the court in Tolkow held that the defendant need only have a reckless disregard of whether he was violating the reporting obligation by failing to make any disclosure. Id. 857-59 and cases cited therein. REPORTING, DISCLOSURE, AND RECORDKEEPING OBLIGATIONS DOCUMENTS REQUIRED TO BE FILED Documents that an ERISA plan administrator is required to file include: A plan description; A summary plan description; Modifications and changes to the plan; and An annual financial report, terminal and supplementary reports as required. DOCUMENTS SUBJECT TO DISCLOSURE Documents that an ERISA plan administrator is required to disclose include: A summary plan description; Modifications and changes to the plan; A summary annual report; A statement of accrued and vested benefits; The latest Annual Report (Form 5500 series); and Documents under which an employee benefit plan is established or operated (i.e., plan document and any trust agreement). Documents which must be disclosed on request, including a statement of accrued and vested benefits, the latest Annual Report (Form 5500), and the Plan Document. RECORD RETENTION Section 107 (29 U.S.C. § 1027) states that: "every person subject to a requirement to file any description or report or to certify any information...shall maintain records on the matters of which disclosure is required WHICH WILL PROVIDE IN SUFFICIENT DETAIL THE NECESSARY BASIC INFORMATION AND DATA FROM WHICH THE DOCUMENTS THUS REQUIRED MAY BE VERIFIED, EXPLAINED, OR CLARIFIED, AND CHECKED FOR ACCURACY AND COMPLETENESS, AND SHALL INCLUDE VOUCHERS, WORKSHEETS, RECEIPTS, AND APPLICABLE RESOLUTIONS, and shall keep such records available for examination for a period of not less than six years after the filing date of the documents based on the information which they contain, or six years after the date on which such documents would have been filed but for an exemption..." EXEMPTIONS FROM REPORTING AND DISCLOSURE The following plans are exempt from ERISA's Reporting and Disclosure requirements: Any employee welfare plan which covers fewer than 100 participants at the beginning of the plan year; Any employee pension or welfare plan whose benefits are provided solely from the general assets of the employeror employee organization maintaining the plan; Any employee pension or welfare plan whose benefits are provided exclusively through insurance contracts or policies issued by an insurance company, provided that any contributions made by the employees are forwarded to the insurance company within three months; Any employee welfare plan which is an apprenticeship plan that exclusively provides apprenticeship training benefits provided: that the administrator files certain information with the Secretary of Labor; ensures that the information required to be contained in such notice to the Secretary of Labor is also disclosed to employees of employers contributing to the plan who may be eligible to enroll in any course of study sponsored or established by the plan; and makes the above information available to employees upon request; or Any employee welfare benefit plan which provides for day care centers. EXAMPLES OF VIOLATIONS Omission or refusal to file with Labor Department annual financial reports (5500 series), plan description, summary plan description (29 U.S.C. §  1024); Omission or refusal to publish summary plan descriptions to participants (29 U.S.C. § 1024); Omission or refusal to furnish information concerning benefits to pension plan participants (29 U.S.C. § 1025); or, Failure to maintain records from which reports and other required documents can be verified and checked (29 U.S.C. § 1027). [cited in USAM 9-135.010]