401k and 403b hardship distribution rule changes proposed by IRS

Earlier this month the IRS released its final draft of proposed regulation changes that will incorporate statutory provisions of the Bipartisan Budget Act of 2018 and Tax Cuts and Jobs Act of 2017 that will have the effect of relaxing the rules on 401k hardship distributions. These proposed regulations extend existing permitted safe habor hardship distributions for 401k and 403b retirement plans. The proposed regulations will become final, subject to potential changes, after a sixty day comment period. It is highly likely that these regulations will become final regulations with little change.

Much of what has been written on these proposed changes by employment lawyers focuses on the effect to employers and plan design moving forward. While employers should consider how these regulations will affect their operations and plans, there is also an effect on employees and other plan participants to consider. Today’s post will look at how these proposed hardship distributions changes will affect employees and their 401k plan benefits.

For a primer on hardship withdrawals, review this post from earlier in the month.

Background on hardship withdrawal changes

401ks and other employer-sponsored retirement plans in the private sector are primarily governed by the Employee Retirement Income Security Act of 1974 (ERISA) which is further defined by a series of Department of Labor and Department of Treasury regulations. When Congress amends ERISA through statute it often requires regulatory changes to reflect the new statutory framework. Here regulatory changes are required due to statutory changes in the Tax Cuts and Jobs Act of 2017 and the Bipartisan Budget Act of 2018. (Specifically, the latter statute cures some of the unintended 401k effects of the earlier statute.)

Initially some plan administrators viewed the statutory changes as voluntary changes they could elect to adopt for their plans; however, regulatory changes in the proposed regulations make it obvious these changes are mandatory and plan administrators must amend plans to conform to the new rules for 401k plans and 403b plans.

Changes to 401k hardship withdrawals

The new regulations deal with safe harbor provisions of hardship withdrawals and rules around procedural aspects of hardship withdrawal eligibility. Today many hardship withdrawals are available under IRS regulations for safe harbor reasons which are strictly defined. Participants may only receive hardship distributions for the amount of the loss under one or more safe harbor reasons but before taking the distribution the participant must exhaust all other loan and withdrawal options from the plan. The participant can only receive a hardship withdrawal under safe harbor rules from his or her elective deferrals and must cease deferring wages to the plan for six months. The proposed regulations change many of these restrictions.

The new regulations change safe harbor hardship distribution procedures to:

  • Eliminate the six month suspension on employee deferrals. Employees will not stop contributing to their 401k despite alleging a financial hardship.
  • Eliminate the requirement to exhaust plan loans prior to a hardship withdrawal. Often today participants do not want to take a loan and will take the smallest loans possible to satisfy the regulatory requirement. The new regulations remove this often low value procedural requirement. Plans may elect to retain this requirement.
  • Expand sources of hardship withdrawals to include qualified nonelective contributions (QNECs), qualifed matching contributions (QMACs) and earnings on QNECs, QMACs and elective deferrals. This change is optional for plans.

Additionally, the proposed regulations change the safe harbor rules to:

  • Expand tuition, funeral and medical expense safe harbor reasons to include a primary beneficiary of the plan participant. This will greatly expand hardship distributions to include a larger circle of people around the participant.
  • Return the definition of a casualty loss to the participant’s primary residence to its pre-2017 definition. The Tax Cuts and Jobs Act reduced the tax deduction for a casualty loss for a primary resident to those involving a federally defined disaster. This had the effect of substantially reducing the available hardship distributions for primary home casualties. The Bipartisan Budget Act of 2018 returned the broader, pre-TCJA definition for hardship withdrawal purposes.
  • Add a seventh safe harbor provision for expenses incurred following a federally declared disaster in an area designated by FEMA. In the past special IRS regulations or a statute would be necessary to expand hardship withdrawals in the face of disasters like hurricanes. The new regulations will automatically make these hardship withdrawals permissive upon federal declaration of a disaster.
  • Clarifies the standard for plan administrators to approve hardship distributions. Under the new rules plan administrators have clear guidance when a distribution is necessary to satisfy a financial need. The plan administrator would:
    • limit the distribution to the participant’s financial need (including taxes and penalties for the distribution);
    • verify the participant has exhausted all other available withdrawals from the plan (not including nontaxable plan loans);
    • receive a representation from the participant that he or she lacks liquid assets to otherwise satisfy the financial need; and
    • the plan administrator does not have contrary information about the participants available assets.

Changes for 403b plans

403b plans receive all the same changes as 401k plans with two exceptions. Hardship withdrawals for 403b plans cannot include earnings on QNECs, QMACs, or elective deferrals. Additionally, if QNECs and QMACs are held in a custodial account within the plan they are not eligible for hardship withdrawal.

Timeframes to make changes and retirement plan amendments

Assuming the highly probable result that the proposed regulations become final regulations, plan administrators will need to begin making changes to plans right away. Most of the changes must take effect on January 1, 2019 which means plan administrators should already be in the process of amending their plans. Although the regulations may not be final at this time, these changes reflect statutory changes that plan administrators must follow. Therefore, plans should be changed to reflect the regulations even before they become final.

Elimination of the six month suspension on deferrals and the requirement for participants to confirm a lack of other resources to cure a financial emergency may wait until January 1, 2020 for implementation. Plans adopting amendments for January 1, 2019 may consider a single plan amendment for simplicity and cost but may choose to wait.

Additionally, the changes to casualty losses and the seventh safe harbor reason are statutory provisions that are already in effect so plans may extend these hardship distributions for distributions after January 1, 2018.

To summarize the required plan admendments: plans must adopt amendments eliminating the six month suspension; must change the safe harbor rule definitions; and must adopt the minimum requirements to prove a participant’s financial need. All other changes are optional changes.

 

 

 

 

What is a hardship withdrawal from a 401k or 403b plan?

Under the Employee Retirement Income and Security Act (ERISA), a 401k or 403b plan may only permit participants to withdraw funds from the plan under specific rules. For current employee-participants, the distribution rules generally severely limit withdrawals. One common form of withdrawal for employees is a hardship distribution. A hardship distribution is what it sounds like; it is a distribution permitted to help the employee cover a financial hardship with retirement funds. There are generally two types of hardship distributions: (1) facts and circumstances hardship withdrawals and (2) safe harbor hardship withdrawals.

An employer can choose what, if any, hardship withdrawals to permit. An employer may choose to allow no hardship withdrawals at all, or only certain safe harbor reasons. Alternatively, an employer could choose to allow all of the safe harbor rules plus additional circumstances that led to an unforeseeable emergency to the employee.

Safe harbor hardship withdrawal rules

Most plans allow hardship withdrawals under the safe harbor rules which currently allow hardship withdrawals for six reasons. These include:

  • The purchase of the employee’s primary residence;
  • Medical expenses of the employee, the employee’s spouse or other dependent;
  • Tuition and other educational expenses for the next twelve months of postsecondary education for the employee, the employee’s spouse or other dependent;
  • Payments necessary to prevent the eviction of the employee or to prevent the foreclosure of the employee’s primary residence;
  • Funeral expenses for the employee, the employee’s spouse or other dependent;
  • Certain expenses to repair damage to the employee’s principal residence caused by catastrophic damage.

Under the safe harbor rules the employee may receive a hardship distribution under one or more rules of the employee’s deferrals. The employee may not receive earnings or employer contributions (except certain employer contributions prior to 1988). The employee may only receive as much as the employee can document is necessary for one or more of these reasons. The employee must allege to the employer that he or she is unable to satisfy these expenses from another source, such as insurance payments. Current IRS regulations require employees to exhaust all other loan and withdrawals from the plan before a hardship withdrawal and the employee cannot make future deferrals to the plan for the following six months.

Why employers operate under safe harbor rules

These rules create a “safe harbor” under IRS regulations so that the employer or other plan sponsor may permit these distributions without a plan audit questioning the validity of the distribution so long as the employer diligently received evidence of the employee’s hardship and reviewed the evidence for conformity with IRS regulations. The less a plan sponsor goes outside of safe harbor rules with an ERISA retirement plan the less liability it creates for itself. Along with operating outside of safe harbor rules also comes paying for more guidance from employment law attorneys who specialize in retirement plans and other compensation issues. If the IRS audits the retirement plan and finds regulatory violations then the plan sponsor may face penalties and may further attorney’s fees to deal with defending against the IRS and fixing plan problems.

Facts and circumstances hardship withdrawal rules

A 401k or 403b plan sponsor may allow additional or alternative hardship withdrawals based upon circumstances beyond the safe harbor rules. These are often referred to as facts and circumstances hardship withdrawals or unforeseeable emergency hardship withdrawals. The rules for these distributions are similar; however, the plan sponsor determines its own reasons why it will approve a hardship withdrawal. The 401k or 403b plan must provide clear explanation under the plan rules what constitutes these facts and circumstances that permit a hardship withdrawal. A plan sponsor cannot create new hardship distribution rules on the fly for employees even if the employee’s reason legitimately is an unforeseeable emergency that could justify a hardship withdrawal.

For the employee a facts and circumstances hardship withdrawal is similar to a safe harbor hardship distribution. The employee’s ability to request a hardship withdrawal is still limited to the employee’s need and the employee must exhaust other financial options before turning to the hardship withdrawal. The facts and circumstances hardship withdrawal differs in not requiring a six months suspension of deferrals. The employee can receive employer matching contributions and nonelective contributions.

Why employers often do not provide facts and circumstances hardship withdrawals

However, the plan sponsor’s responsibilities under a facts and circumstances hardship withdrawal differs. The sponsor’s liability for mismanagement of the plan is greater because the sponsor must define the hardship and necessary evidence of the hardship for each fact and circumstance. If the sponsor fails to define facts and circumstances that satisfy IRS regulations or fails to objectively and consistently apply those rules then it may face severe penalties for permitting invalid distributions. At a minimum, the cost of administering plan rules beyond safe harbor regulations increases as the plan pays for additional employment lawyer time to design, review and counsel the sponsor on plan administration. Most employers and other plan sponsors try to avoid expanding their attorney’s fees for plan administration.

Colorado 401k lawyers for hardship withdrawals

Why ERISA and IRS regulations limit hardship withdrawals at all

As an employment lawyer who deals with ERISA retirement plan issues I have long heard questions around why ERISA regulates hardship withdrawals at all. These are understandable questions for several reasons. After all, the funds in your 401k or 403b plan are your deferred compensation and funds from your employer earned as part of your overall compensation. Most bank accounts and other savings vehicles allow you to pull your funds at any time, even if at a penalty. Expecting the same from your employer-sponsored retirement plan is not an unusual expectation; however, there are several reasons why federal employment law and your employer’s plan rules limit hardship withdrawals and other distributions.

The primary reason why ERISA and its accompanying regulations limit pre-retirement distributions is to encourage retirement savings. Taking your funds out prior to retirement directly opposes that goal. Permitting a limited range of pre-retirement distributions strikes a balance between helping employees save for retirement and discouraging savings because employees may need access to the funds in the event of a financial emergency. That is why the vast majority of ERISA-governed retirement plans permit at least some hardship withdrawals or loans.

Employers have legitimate reasons to limit active participants from depleting retirement savings. Compliance with other ERISA statutory and regulatory requirements is an important component of operating a retirement plan. Failure to comply with these requirements can result in financial penalties to the plan sponsor and worse, can even result in disqualification of the plan which causes direct financial harm to the participants. Distributions can be a major source of liability for plan administration. They also bear expense on the plan. Distributions are among the more expensive transactions for the plan so the more distributions the plan processes the greater administration expense and the more likely the employer will raise plan fees to account for it. Frequent distributions also require the plan to structure investments to the participants and for management in ways that can be less valuable to participants.

Implications of taking a hardship withdrawal from your retirement plan

A hardship withdrawal may help deal with an imminent emergency but create other complications down the road. Participants considering a hardship withdrawal should carefully consider the drawbacks to taking a hardship withdrawal before submitting a request.

The most obvious potential issue with a hardship withdrawal is that the distribution is taxable to the extent the distributed funds are untaxed. Most retirement funds eligible for a hardship withdrawal will be pre-tax funds subject to ordinary income tax upon distribution. You may have some after-tax or Roth deferrals within the hardship withdrawal that are not subject to taxes. In addition to ordinary income tax, any taxable portion of the withdrawal may be subject to a 10% early withdrawal penalty.

You should consider the tax liability of your request at the time of distribution. Plan rules may allow you to gross up your withdrawal request, meaning you can request an additional amount to cover some of the taxes due on the withdrawal request. The danger here is that if you do not adequately plan for the additional taxes due at tax time you may find yourself rolling one financial hardship into the next one when you pay taxes the following year.

Additionally, under the current ERISA rules, a plan may or must suspend your deferrals to the plan for six months following a hardship withdrawal. A hardship withdrawal will not only deplete your retirement plan of existing funds but may limit your ability to replenish those funds. In certain economic conditions this can severely harm your retirement savings beyond the amount of the distribution. Consider your options to handle your current financial emergency in other ways and how you will make up the retirement savings depleted by your hardship withdrawal.

Similarly, by taking funds out of your retirement plan you may negatively affect your investments or investment strategy for retirement. Some plans include complex investments or investments that require you to pay fees to liquidate them to fund your hardship withdrawal. Consider how your request may incur additional fees or lock in investment losses as a result of your request. In an urgent financial emergency these may be worthwhile risks to accept but down the road you may have wished you dealt with them differently. Some retirement plans allow you to select investments to liquidate for these distributions to minimize these costs. Review your plan documents before submitting your hardship request to see what options are available.

Can an employment lawyer help me get a hardship withdrawal if the plan administrator says no?

Another common question directed to employee rights lawyers is what can be done when a plan administrator denies a hardship withdrawal request. Again, this is a completely normal question. If you need a hardship withdrawal then it is probable that you have a serious financial emergency and need whatever help you can get. The answer to this question depends upon the particular facts in your situation.

Do you qualify under the plan’s hardship withdrawal rules?

The first issue is whether you qualify for a hardship withdrawal under the plan’s rules. ERISA statutory and regulatory rules require plan administrators to administer the plan within plan rules uniformly and consistently. The plan administrator cannot create new hardship withdrawal reasons even if your situation would qualify as an unforeseeable emergency under ERISA. The plan administrator also cannot create different qualification rules for your withdrawal request. For example, the plan administrator cannot allow you to submit less specific documentation than other employees or approve your request for slightly different reasons than what the plan rules specifically permit.

Instead your hardship withdrawal request must fall within one of the reasons specifically described by plan rules and you must provide the documentation of the hardship within the plan’s normal approval procedures. To determine whether you comply with the plan’s rules and procedures an employment lawyer will often need to review the plan documentation against your request documentation. If your request does not fall within the plan rules then your employment lawyer may discuss other options to request a hardship withdrawal or other distribution under the plan rules.

Did my hardship withdrawal request comply with plan rules?

Sometimes plan administrators and their agents fail to process an appropriate request for a hardship withdrawal but often people fail to submit proper requests. Determining what will cure a failed application for hardship withdrawal application is usually not a difficult process if you understand how retirement plans process these requests. Today many retirement plans process hardship distributions without requiring participants to submit written applications or documentation but problems can still arise in processing your request.

In some cases problems arise although the plan received a complete and compliant request. These may come from technical problems processing the application or a manual error by somebody in the midst of processing your request. Sometimes people involved in your employer’s retirement plan do not fully understand hardship withdrawal rules which can cause unnecessary delay. These are situations where an experienced employment lawyer can help you navigate the process by working with your plan administrator to resolve errors in the process.

On the other hand, your request may be deficient because an application was incomplete or the supporting documentation does not adequately support the request. Plan administrators often require specific documents to approve a hardship request and you may not have access to the specific document at this time. An employment lawyer can review your plan rules and work with the necessary parties to cure your application and get the hardship withdrawal approved as quick as possible.

When to contact an employment lawyer in Colorado about a hardship withdrawal?

If your employer refuses a hardship withdrawal request and you cannot resolve the denial with your employer then it is a good idea to talk to Colorado employment lawyers in your area about your situation. Do not delay talking to employment lawyers near you. Many hardship withdrawal situations are time sensitive and you and your employment lawyer may have many steps to take to resolve the withdrawal request. The longer you wait the more difficult it may be to prevent the hardship from becoming a larger problem.

In more troubling situations the plan administrator’s refusal to process a valid hardship withdrawal may signal more serious problems with the plan. The plan sponsor or somebody with access to plan funds may have depleted plan assets or other fiduciary problems may exist with plan administration. The plan administrator’s acts may also be part of a larger problem such as unlawful employment discrimination. These are issues an experienced employment lawyer can explore with you. Talk to a Denver employment lawyer about your retirement plan problems.

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What is a fiduciary and what does it have to do with employment law?

Fiduciary duties are not a substantial component of employment law in the same way they saturate other areas of law like securities law or trust law; however, they play an important role in specific issues in employment such as employee benefits and issues involving employee competition with the employer. Employees should understand the interplay between fiduciary duties under federal and Colorado law and their employment, both on behalf of the employer and employee. As this can involve complex legal issues, employees should talk to a Colorado employment lawyer for advice about specific situations.

What is a fiduciary?

A fiduciary is a person or entity that holds a legal relationship of trust with another. Two  common ways a person can become a fiduciary to another is by:

  1. Creating an agency relationship; and/or
  2. Acting as the trustee of assets.

A party becomes a trustee by holding the assets of another when the trustee is entrusted with the care and control of the beneficiary’s assets. For example, when you deposit your wages in your bank account your bank is a trustee of the account and therefore a fiduciary to those funds. It must act with care to your account and not use your money for its own purposes.

An agency relationship also creates a fiduciary relationship. Agency merely means there is a principal-agent relationship. The agent is a fiduciary to the principal in the relationship. An agent is a person empowered by the principal to act on its behalf as though the principal acted itself. For example, if you hire a lawyer to represent you in an employment lawsuit then the lawyer is your agent in the legal proceedings and must act with care in dealing with your case and pursue the case for your interests rather than her own.

What is a fiduciary duty?

A fiduciary has fiduciary duties to the principal (for an agency relationship) or beneficiary (to a trustee). Fiduciary duties are primarily the duties to act in good faith and loyalty to the person owed those duties. Courts across the country deem fiduciary duties as the highest duties imposed upon a party under the law. In practice courts do not always hold parties to the soaring rhetoric used to describe these duties but at least they tell us they should.

Most people think about fiduciary relationships with relationships between business and consumer such as a bank and its customers or consumers and professionals such as lawyers or real estate agents. These are definitely fiduciary relationships under federal and Colorado law. Fiduciary relationships also exist in other forms of asset entrustment and agency relationships. This is definitely true in the employment relationship. Employers can owe fiduciary duties to their workers and vice versa.

It’s important to point out that fiduciary duties can arise from various legal relationships within the employment context. For example, an employer may have statutory fiduciary duties to employees under the federal Employee Retirement Income Security Act (ERISA) to employee benefit plans protected by ERISA and the employee may have fiduciary duties to the employer under Colorado common law. The specific fiduciary duties owed differ under these relationships and sources of law. Even across states the fiduciary relationship and fiduciary duties can vary significantly.

Defining the specific fiduciary duties in a given situation can be complex and require specific legal analysis under federal and Colorado law. Do not rely upon general information to assess the parameters of a fiduciary relationship or fiduciary duties involved.

What is an employee’s fiduciary duty to his or her employer?

The employee-employer relationship is an agency relationship which means the employee has a duty as the employer’s agent as a fiduciary. An employee’s fiduciary duty primarily revolves around the duty of loyalty. The duty of loyalty of an employee is not really a single duty but rather a collection of duties to the employer. Forgetting the issues of law for a moment, it makes common sense. No sane employer would hire an employee expecting the employee to use the position to harm the employer or compete against the employer. It does not mean the employee is at all times a slave to the employer; but the employee has a responsibility to deal fairly with the employer.

Courts at times disagree with what exactly an employee’s duty of loyalty entails. Often courts hold that an employee’s duty of loyalty is commensurate with the employee’s job duties and level of trust extended by the employer. For example, a front line employee might have a minimal duty of loyalty to the employer; however, a sales executive likely has a greater duty because she has access to confidential client lists, product knowledge and could easily use that information with a competing business.

Broadly an employee’s duty of loyalty to the employer can be broken up into two sub-duties:

  1. Duty to exercise job with care; and
  2. Duty not to compete with the employer.

Duty of care by the employee

The duty to fulfill job duties with care is very simple. An employee is reasonably expected to perform the job duties with diligence and without intentionally causing waste or harm to the employer’s business or property. That does not mean every time an employee underperforms the employee has breached a fiduciary duty to the employer; however, when an employee intentionally performs the job in a manner that is harmful to the employer then the employer may have an argument for a breach.

In practice, this often becomes an issue when an employee with access to valuable property willfully causes its destruction or loss of value. Most employers do not want to endure the time or cost to hire employment lawyers and pursue a lawsuit against an employee.

Employee’s duty not to compete with the employer

Fiduciary duty claims against employees are far more likely when the employee uses his or her position to compete against the employer. In fact, most breach of fiduciary duties in any fiduciary relationship arise from the fiduciary self-dealing. Employees management positions, sales staff and employees responsible for developing new products or services are most likely to have access to resources that allow them to compete with the employer. Common ways employees compete against the employer include:

  • Taking confidential customer or client lists to use at another employer;
  • Using one employer’s proprietary sales techniques for another employer;
  • Making sales or purchases for the employer that produce a side benefit for the employee;
  • Taking or selling confidential or proprietary research or products to another business;
  • Soliciting other employees to follow them to a competing business; or
  • Owning or working for a competing business without the employer’s approval.

Both federal and state courts assessing fiduciary duty claims in Colorado tend to uphold employer claims when employees compete against their employers in these ways. Practically, the more an employee’s self-dealing or competition with the employer may or has financially harmed the employer the more likely the employer is to pursue a claim against the employee in court.

Non-compete Agreements

Although employers can pursue breaches of fiduciary duty claims in Colorado, an employer may decide that a lawsuit after the breach occurs is not a great remedy. After all, if an employee sends trade secrets like client lists or marketing research to a competing business then it’s effectively impossible to get that information back. Filing a lawsuit may take years to resolve with no guarantee that a jury will be more sympathetic to an employer than employee. To help solve this problem many employers require employees with access to confidential information, client relationship, or high level decision-making to sign non-compete agreements.

Non-compete agreements, under employment law, are contracts between employer and employee that restrict the employee from competing against the employer by:

  • Working for a competitor;
  • Sharing confidential trade secrets with competitors;
  • Self-dealing to the employer’s detriment; or
  • Soliciting clients and employees to join a competing business.

A non-compete agreement in many ways converts fiduciary duties from common law to contract and gives employers contractual remedies against the employee. A non-compete agreement can go farther than an employee’s fiduciary duties by limiting the employee’s ability to quit working for the employer and immediately go to work for a competitor.

Colorado law and non-compete agreements

States differ in how broad they allow non-compete agreements to restrict an employee’s ability to earn a living beyond the employer. Employers have an incentive to use non-compete agreements aggressively to retain employees. Employers may seek broad non-compete agreements as a poison pill to make it difficult for employees to leave and find work elsewhere. That in turn can give the employer a tactical advantage in negotiating compensation to the employee’s detriment.

Colorado greatly limits the enforceability of non-compete agreements to prevent employer overreach. These limits are first statutory under Colorado Revised Statutes 8-2-113 which makes all covenants not to compete void unless they meet an exception involving:

  • The sale of a business;
  • Protection of a trade secret;
  • Executive or managerial employees and their staff.

Colorado, unlike some other states, does not allow a non-compete agreement to bind professionals like physicians to an employer even if the physician has trade secrets or acts in a managerial capacity over a hospital or clinic.

If a covenant not to compete passes the statutory bar it may still fail in the courts. Colorado courts refuse to uphold non-compete agreements if they are not reasonable in duration and scope. A non-compete agreement is unreasonable if it exceeds the bounds necessary to protect the employer’s interests and does not impose a material hardship on the employee. Courts in Denver and other parts of Colorado routinely uphold covenants not to compete up to five years and 100 miles from the business. See Reed Mill & Lumber Co., Inc. v. Jensen, 165 P.3d 733 (Colo. App. 2006).

Do employers have a fiduciary duty to employees?

Generally employers do not have fiduciary duties to employees. Recall that the fiduciary relationship flows unilaterally from fiduciary to beneficiary. It is not a bilateral relationship; however, within a two-party relationship it is possible that the parties are separately fiduciaries in different roles to the other.

The most common way an employer acts as a fiduciary to employees is when it operates retirement benefits for the employee. Retirement plans, such as defined benefit pensions, 401k plans and 403b plans, require employers to hold assets in trust for employees. This requires that the employers act in the interests of employees and exercise care with the assets. The Employee Retirement Income Security Act of 1974 (ERISA) governs most private employee retirement plans and establishes statutory fiduciary duties that limit the employer’s ability to use the plan or plan assets to its own financial gain. ERISA’s thicket of statutory and regulatory duties tightly constrain employers and a breach of these duties can result in costly penalties to the employer.

Some lawyers and other legal experts argue that employers are or should be fiduciaries to employees for wages and other compensation earned but not paid. To date Colorado courts generally have not agreed although there are at least good arguments why employers should have fiduciary duties when they deduct from wages for benefits, child support payments and other legal purposes. In many of these cases Colorado provides statutory remedies when employers unlawfully deduct from wages, do not make timely payment of wages, or otherwise fail to pay wages within the confines of the Colorado Revised Statutes.

When should you hire an employment lawyer in Colorado for a fiduciary duty issue?

Breach of fiduciary duty claims can carry substantial financial recovery for a prevailing employer therefore it is always a good idea to talk to an employment law attorney as soon as an issue arises. Ideally you should talk to an attorney before making any employment or business decision that your employer might perceive as self-dealing or competition. However, if the employer has already filed suit or threatened to file suit then you need to talk to an attorney immediately.

If you believe your employer self-dealt or otherwise abused assets in a retirement plan then you should find an employment law attorney to talk to about potential claims against your employer. Under ERISA and other laws governing employee benefits, an employee or retiree must often follow a specific process before filing suit and must file specific claims in a lawsuit to recover from the employer. ERISA claims are extremely complex claims and employers often hire employment lawyers from big law firms that specialize in ERISA to represent them.