The Employee Benefits Security Administration (EBSA), a division of the U.S. Department of Labor (DOL), announced the results of several court cases involving employer-operated 401(K) retirement plans. Unfortunately, company executives decide not to deposit contributions into employees' retirerment accounts more often than you might think.
The EBSA announced last week in a news release that a judge in U.S. District Court in Northern Illinois ruled on a lawsuit the agency filed in February 2013 against the Hico Flex Brass Company. The EBSA complaint sought $79,104.11 for employees participating in the company's 401(K) retirement plan. The EBSA lawsuit alleged:
"... the company, Hico Flex Brass Co. Inc., as well as former vice presidents and Plan trustees Mark Isaacs and Neil Isaacs, violated the Employee Retirement Income Security Act by withdrawing $702,153.99 in Plan assets and thereafter failing to distribute the full amount of Plan assets to participants."
The judge ruled on the case and issued a Consent Order:
"Pursuant to the Consent Order and Judgment, Mark Isaacs and Neil Isaacs agreed to restore $79,104.11 in undistributed Plan assets to the Plan and are permanently enjoined from serving as fiduciaries or service providers to any employee benefit plan subject to the Employee Retirement Income Security Act."
A prior Consent Order dated June 4, 2013 by the Court:
"... held Hico Flex Brass Co., Inc. liable for failing to distribute plan assets to participants and enjoined Hico Flex Brass Co., Inc. from serving as a fiduciary or service provider to any employee benefit plan subject to the Employee Retirement Income Security Act."
Also last week, the EBSA announced the recovery of money for employees of a failed Rhode Island day care service. The Rumford Day Nursery Inc. (RDN) of Rumford, Rhode Island operated a Simple IRA plan for its employees.The business stopped operations in December 2009. According to the EBSA news release, the business:
"... operated day care centers in Barrington, Coventry, East Providence, North Kingston and Westerly, R.I. and in Seekonk, Mass... RDN was the plan's administrator and Deborah Very-King, the company's owner and chief operating officer, was the sole decision maker for the plan."
The EBSA filed a lawsuit alleging:
"Beginning in 2007, the defendants failed to forward about $23,506.98, plus lost opportunity costs, in withheld employee contributions to the plan and failed to collect about $20,947.14 in employer contributions, plus lost opportunity costs, due to the plan."
The ruling included:
"... a consent judgment orders the defendants to pay $52,945.96 in principal and pre-judgment opportunity costs to the plan in monthly installments... The judgment also permanently prohibits Very-King from serving as a fiduciary to any ERISA-covered benefit plan."
Opportunity cost is the lost interest by retirement plan participants. When employers fail to deposit contributions into employees' retirement plan accounts, the employees lose interest.
Within the U.S. Department of Labor (DOL) federal agency, its Employee Benefits Security Division (EBSA) oversees employee benefits programs, including about 684,000 retirement plans, 2.4 million health plans, and related employer-sponsored benefits plans (e.g., stock plans, IRA plans). All of these plans cover about 141 million individuals (e.g., employees and their dependents), with assets of about $7.6 billion.
During January 2014 and December 2013, the EBSA announced the filing of several lawsuits against employers and executives to recover benefits for employees in retirement, stock plan, profit sharing, and health plans. The companies named in these lawsuits:
- Western Steel Erection, Inc.
- F.V. Zanetti Inc.
- Kephart Trucking Company
- Double D Excavating LLC
- Miller's Health Systems
- Sunstrand Electric Company
- Home Valu Inc.
- Central Pennsylvania Pulmonary Associates LLC
I congratulate the DOL for these actions. It is important to recognize both their hard work and the benefits recovered for employees. When employers and executives fail to follow wage laws and fail to deposit contributions into employees' retirement accounts, there has to be substantial consequences.