1 NECA LABOR RELATIONS CONFERENCE SAN ANTONIO, TX OCTOBER 12-14, 2009 Presented by: Paul Heylman Saul Ewing LLP SOME BASIC RULES OF AUDITS AND COLLECTIONS

2 Rules Concerning Audits Requirements that multi-employer plans audits employer contributions –Fiduciary requirements generally –Prohibited transactions: U.S. Department of Labor regulation of the relationship between fund and contributing employers on less than full, timely contributions and PTE 76-1

3 Scope of audit –Issues that must be covered –Problems obtaining documents –Audit authority Many plans establish field audit programs either through a clause in the CBA or by incorporation of the trust agreement (containing the right to audit) by reference in the CBA Implied right to audit cases Best Practices – a strong audit clause Rules Concerning Audits

4 Delinquent Contributions Plan fiduciaries must use reasonable diligence to ensure that the plan receives all contributions owed to it – what happens if they don’t Failure to establish and implement “reasonable collection procedures” and ERISA rules The “extension of credit” to an employer by delayed collection and the prohibited transaction rules Settlements and the fiduciary rules Personal liability of plan trustees

5 Judicial Enforcement of Contribution Obligations When Calculation Impossible or Impracticable Some courts apply a burden-shifting approach –Fund may rely on a reasonable approximation of the amount of the delinquency –Employer has the burden of rebutting the reasonableness of the approximation –If the employer is unable to provide an explanation, the fund is entitled to summary judgment Some courts defer to the trustees’ interpretation of the CBA if not arbitrary and capricious

6 Remedies Upon a Finding of Delinquency Plan prevailing in a delinquency action awarded unpaid contributions, prejudgment interest, liquidated damages, and reasonable attorneys’ fees and costs Plans may receive fees, interest, and liquidated damages even if they are only partially successful in their claims Injunctive relief to compel employers to comply with contribution requirements

7 Remedies Upon a Finding of Delinquency, cont’d Civil contempt as a remedy against officers of a corporation Recovery of audit costs Other potential sources of recovery

8 Personal Liability of Shareholders and Corporate Officers Generally, shareholders and corporate officers are not liable for the payment of contributions owed by a corporation – but.... They may be liable for contributions where –they sign the CBA in a personal capacity –the CBA provides for personal liability –a court pierces the corporate veil or finds them to be alter ego

9 CONTACT INFORMATION Paul Heylman, Esquire 2600 Virginia Avenue, N.W. Suite 1000 – The Watergate Washington, DC Phone: Fax:

10 Saul Ewing’s Office Locations Baltimore, Maryland Lockwood Place 500 East Pratt Street, Suite 900 Baltimore, MD fax: Chesterbrook, Pennsylvania 1200 Liberty Ridge Drive, Suite 200 Wayne, PA fax: Harrisburg, Pennsylvania Penn National Insurance Tower Two North Second Street, 7th Floor Harrisburg, PA fax: Newark, New Jersey One Riverfront Plaza Newark, NJ fax: New York, New York 245 Park Avenue, 24th Floor New York, NY Fax: Philadelphia, Pennsylvania Centre Square West 1500 Market Street, 38th Floor Philadelphia, PA fax: Princeton, New Jersey 750 College Road East Princeton, NJ fax: Wilmington, Delaware 222 Delaware Avenue, Suite 1200 Wilmington, DE fax: Washington, D.C Virginia Avenue, N.W. Suite 1000 | The Watergate Washington, D.C fax: