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Saturday, December 9, 2023
Courthouse News Service
Saturday, December 9, 2023 | Back issues
Courthouse News Service Courthouse News Service

Pension Plan Win in 9th Circuit for Calif. Fireman

SAN FRANCISCO (CN) - A pension plan for California firefighters illegally paid its own fees and expenses from plan assets, the 9th Circuit ruled Tuesday.

Retired Tracy fireman David Barboza brought the federal complaint in Sacramento against the entities that manage his pension plan, the California Association of Professional Firefighters and California Administration Insurance Services Inc.

Participants like Barboza fund the plan with monthly contributions that are deposited into a checking account of which CAISI officers are the signatories.

When a plan participant suffers total disability from injury, sickness or pregnancy, CAISI determines whether the participant is eligible to receive benefits.

Barboza claimed that the defendants mismanaged the plan by violating a requirement of the Employee Retirement Income Security Act that "all assets of an employee benefit plan shall be held in trust by one or more trustees," by engaging in unlawful self-dealing and by failing to distribute a summary annual report.

A federal judge found no breach by the defendants in the "hold in trust" requirement, and the 9th Circuit affirmed on this point but reversed on others Friday.

Although ERISA contains a number of exemptions from its self-dealing prohibition, these exemptions do not apply to a fiduciary that engages in a prohibited transaction by paying itself from the assets of a welfare benefit plan, according to the ruling.

"Because [the act's] safe harbor for fiduciary compensation is not applicable in this context, we conclude that CAISI breached its fiduciary duties," Judge Sandra Ikuta wrote for a three-person panel.

The court sided with the plan administrators, however, on a separate reversal, finding no violation in failure by the defendants to distribute a summary annual report.

ERISA exempts a "totally unfunded welfare plan" from distributing such a report, and Ikuta said that this exemption applies to the plan at issue.

The plan meets the required definition of "totally unfunded welfare plan" because it is an employee welfare benefit plan, its manager is an employee organization and benefits are paid solely from the manager's general assets, according to the 22-page opinion.

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