Little did Jamila Minnicks know the firestorm she would start when she wrote a memorandum asking the U.S. District Court for the District of Idaho to remove Matthew Hutcheson from exercising authority or control over one of the plans he served as fiduciary or trustee for, and asking the court to appoint an independent fiduciary to wrap up the plan. For those of you who have not been following the Matthew Hutcheson situation, he was a fiduciary for a number of plans who has been criminally charged with wire fraud and misappropriating pension funds and is currently awaiting trial on those charges. For those of you who do not know Jamila Minnicks, she is a Trial Attorney with the Plan Benefits Security Division of the Dept. of Labor. When there are allegations of missing pension funds due to criminal activity, it is normal for the Dept. of Labor to work with federal prosecutors to secure any pension funds which may be at risk, including asking a court to removing the existing fiduciaries and trustees and replacing them with independent fiduciaries.
It is also normal for a trial attorney to file a Memorandum in Support of an application for a temporary restraining order (TRO). In most courts, an application for a temporary restraining order is a pre-formatted form which doesn’t provide adequate space to explain to the judge why the court should issue the temporary restraining order, so the trial attorney will write a separate Memorandum in Support containing the reasons why the court should issue the TRO. In Matthew Hutcheson’s case, Jamila Minnick was able to give the court 25 pages of reasons why Matthew Hutcheson should be removed as a fiduciary, including:
“For these reasons, the relief sought herein is necessary because Defendant Hutcheson, who has been separately indicted by the United States, in part, for his criminal activity in connection with his improper acts, remains to this day a fiduciary with control over the Plans. Thus, the Secretary respectfully requests that this Court immediately appoint an independent fiduciary with exclusive authority and control over RSPT, the Plans, and their assets and remove Defendants Hutcheson and HWA from all authority and control over RSPT, and Plans, and their assets.”
Notice that the government says “authority and control over RSPT, the Plans, and their assets”. Just like in plan documents, when a word is capitalized in a trial brief, it usually has a specific definition. In the Memorandum of Support, the word “Plans” is capitalized and is used to designate when the trial attorney is referring to the individual plan sponsors within RSPT who had money misappropriated from their plan assets. The first paragraph of the Memorandum in Support creates this distinction between the individual plan sponsors and the trust holding the plan assets with:
“Plaintiff Hilda L. Solis, Secretary of the United States Department of Labor (“the Secretary”), respectfully submits this Memorandum in Support of her application for a temporary restraining order (1) prohibiting Matthew D. Hutcheson and Hutcheson Walker Advisors, LLC from exercising authority or control over the Retirement Security Plan & Trust (“RSPT), the assets it holds for ERISA-covered plans (the “Plans”), and the Plans and (2) appointing an independent fiduciary with exclusive authority and control over RSPT, the assets it holds for ERISA-covered plans and the Plans. The Secretary also seeks an order to show cause why a preliminary injunction should not be granted.”
This distinction is important because, later within the 25 pages of reasons why Matthew Hutcheson should no longer be permitted to have authority or control over plan assets, the trial attorney uses the word “Plans”. It is this use of the word “Plans” in the Memorandum in Support which seems to be the spark that has lit a bonfire of rumors about multiple employer plans because of the way the trial attorney uses the word “Plans” in 4 sentences within the Memorandum’s 25 pages. Those 4 sentences have been latched onto and quoted as official guidance issued by the Dept. of Labor which, depending on who you hear the rumor from, either prohibits all multiple employer plans, or prohibits some multiple employer plans, or adds language to Internal Revenue Code section 413(c) requiring all sponsors of multiple employers plans to share some type of commonality. As we go through those 4 sentences, keep in mind that a Memorandum in Support of [an] Application for a Temporary Restraining Order and For an Order to Show Cause why a Preliminary Injunction Should not be Granted is just that – a memorandum supporting a request for a TRO filed with a trial court. It can not add language to the Internal Revenue Code (only Congress can do that). It cannot change Treas. Reg. 1.413-2 (only the IRS can do that). And it is not official guidance from the Dept. of Labor.
Criminal cases start with indictments, so let’s start with Matthew Hutcheson’s indictment. The indictment says:
“18. The G Fid Plan, the RSPT, and the NRSP are all Multiple Employer Plans (“MEP’s”). Unlike single-employer plans or traditional multi-employer plans, MEP’s are intended to serve as a retirement plan that can be adopted by numerous employers notwithstanding that there is no common ownership or affiliation among the adopting employers.”
For those latching onto random sentences about multiple employer plans contained within the court filing in the Matthew Hutcheson case, this sentence provides all the proof they need that no common ownership or affiliation is required among adopting employers of a multiple employer plan. This sentence in the indictment is also contrary to the first sentence in the second paragraph of the Factual Background section contained in the Memorandum in Support, which says:
“In fact, RSPT was not a single ‘multiple employer plan’ pursuant to ERISA. This is because there was no commonality of employment-based interest among the participating employer sponsors of the plans apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a “group” or “association” of employers as required to be a single plan covering multiple employers for purposes of ERISA section 3(5), 29 U.S.C. section 1002(5). Thus, RSPT failed to qualify as a single “pension plan” for purposes of ERISA section 3(2), 29 U.S.C. 1002(2), since it was not established or maintained by an “employer” for purposes of that section.”
For half of the multiple employer plan community, the indictment contains the correct statement that “no common ownership or affiliation among the adopting employers” is required of multiple employer plans.
For the other half of the multiple employer plan community, the Memorandum in Support contains the correct statement that “because there was no commonality of employment-based interest among the participating employer sponsors of the plan apart from the provision of retirement benefits, and there was no control of the program by the participating employers such that RSPT qualified as a group or “association” of employers as required to be a single plan covering multiple employers”, RSPT was not a single ‘multiple employer plan’.
Because they contradict each other, both statements cannot be simultaneously true. Or is it possible that the sentence about commonality and RSPT is being misread because of the way the first paragraph in the Memorandum in Support distinguished between RSPT and the Plans. Either way, neither one is official guidance from the Dept. of Labor, the IRS or Congress about what type of commonality is required among plan sponsors of multiple employer plans.
The reason I say what type of commonality is required is because all plan sponsors of multiple employer plans share some type of commonality. Whether it is a common plan design, a common investment strategy, a common geographical location, a common membership in a trade association, or a common business plan involving leasing of employees, all plan sponsors in multiple employer plans share some type of commonality or they would not have been motivated to join together in a multiple employer plan. Whether the Dept. of Labor decides it is more important that plan sponsors share a common membership in a chamber of commerce before they can join together in a multiple employer plan, or whether the Dept. of Labor decides it is more important that plan sponsors share a common investment strategy and plan design before they can join together in a multiple employer plan, is still to be seen and will not happen in any of the pleadings filed by the government in the criminal case involving Matthew Hutcheson.
On the other hand, if the government keeps flip-flopping on this point in the Matthew Hutcheson criminal case, the criminal case against Matthew Hutcheson may go away. If the government can’t agree on whether RSPT was a multiple employer plan or not, how can they explain to a jury of non-retirement plan professionals how RSPT, or the Plans, operated in a way that allowed Matthew Hutcheson to misappropriate their pension funds.