Business owners and leaders who are facing financial challenges should consider a mounting series of recent court orders and federal prosecutions as strong reminders of the personal risk they may face for mismanaging employee benefit programs governed by ERISA.

The mishandling of employee benefit obligations by financially distressed employers during the ongoing economic downturn is fueling an increase in enforcement actions by the Employee Benefit Security Administration (EBSA) against the companies and their officers or directors for alleged breaches of fiduciary duties or other mishandling of medical, 401(k) and pension benefit programs.

EBSA’s enforcement activities during 2009 continue to highlight the longstanding and ongoing policy of aggressive investigation and enforcement of alleged misconduct by companies, company officials, and service providers with the maintenance; administration and funding of ERISA-regulated employee benefit plans.

A review of the agency’s enforcement record makes clear that if regulators perceive that a plan sponsor or its management fails to take appropriate steps to protect plan participants, EBSA will aggressively pursue enforcement regardless of the size of the plan sponsor or its plan, or the business hardships that the plan sponsor may be facing.

. . . Recent settlements and judgments obtained by government attorneys and through private litigation document that officers and other members of management participating, or possessing authority to influence, the handling of health, 401(k) and other pensions, or other employee benefit plans regulated by ERISA may be exposed to personal liability if these benefit programs are not maintained and administered appropriately.

This risk is particularly grave when the sponsoring company becomes financially distressed or goes bankrupt, as the handling of employee benefits and other responsibilities becomes particularly disrupted and the lack of company liquidity often leaves executives and service providers as the only or best source of recovery for government officials and private plaintiffs.

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