The ninth circle stated that the fact that there was no formal trust did not require that the assets not be held in trust. The court ruled that under customary federal law, the third-party administrator (Wells Fargo) considered the trust assets to be the beneficiaries of the plan. No formal trust document was required and there was no breach of the trust requirement. For example, the court found that a trust had sufficient assets to make the payment of its fees by the third-party administrator a prohibited transaction, but the plan was not funded for the purpose of requesting a summary annual report. The court also found no breach of the trust requirement, although there was no formal trust. It`s probably baseball for everyone except ERISA Geeks. We will have to see if other circuits have similar approaches to those of ERISA trusts. However, given the Ministry of Labour`s dissatisfaction with this matter, we would not recommend that other sponsors of plans rely on the common law rather than create a formal trust in situations where ERISA requires a trust. A Ninth District Appeals Court recently considered the trust requirement with a multi-employer plan put in place for firefighters in California. The plan was a long-term disability plan funded by participation contributions paid into a Wells Fargo current account, to which the third-party administrator`s officials were signatories. The current account was not a formal trust account and there was no formal trust agreement. In a complaint, the Ministry of Labour claimed that this was contrary to ERISA`s requirement of trust.
The Ministry of Labour was not satisfied with this decision and asked the Ninth Circle to reconsider it. The Ninth District objected to a new review of the bench, but reiterated its repeated view that the assets were held in trust under federal customary law, although there was no formal trust agreement. The Court also found that the third-party administrator carried out a prohibited transaction by paying himself a fee on the assets of the plan, whereas the agreement concluded with the organizing association allowed the third-party administrator to pay his fees and expenses from the plan account. One would expect that if the assets were held in trust, a Form 5500 would have to be filed, as the trust would not then be unfunded. Funded benefit plans must be reviewed and a more complete form 5500 must be submitted if there are more than 100 participants. However, the Tribunal also concluded that the plan was a totally uncovered social benefit plan, since the benefits were paid out of the general assets of the workers` organization sponsoring the plan. . . .