Visit us at our Breakout Session at NAPEO 2018

Please visit us at NAPEO 2018 in Phoenix. We will lead the following Breakout Session on Thursday, Sept. 6, 2018 from 4:30 to 5:30 pm.

How to Survive a Regulatory Audit of a PEO Benefit Plan

William Kropkof, Managing Member, The ERISA Advisory Group and Sheldon J. Blumling, Esq., Partner, Fisher Phillips

A regulatory audit of your PEO benefit plan is more common than you might think – The DOL and the IRS are looking at PEO’s. An audit can be extremely time consuming, stressful, and expensive even if there are no violations We will discuss the ways to be ready for an audit. William Kropkof of ERISA Advisory Group and Sheldon Blumling of Fisher Phillips will walk you through the audit process from the Department of Labor’s point of view and offer advice and strategies of how to achieve the best outcome.

 


Read More

US Labor Department files lawsuit to recover employees’ contributions for participants in two Passages Hospice benefit plans

Tuesday, January 17, 2017

Date of Action: Jan. 17, 2017

Type of Action: Employee Retirement Income Security Act lawsuit

Names of Defendants: Sandor Szajkovics
Passages Hospice LLC
Passages Hospice LLC Dental Plan, Passages Hospice LLC Employee Benefits Plan

Read More

Date of Action: Jan. 17, 2017

Type of Action: Employee Retirement Income Security Act lawsuit

Names of Defendants: Sandor Szajkovics
Passages Hospice LLC
Passages Hospice LLC Dental Plan, Passages Hospice LLC Employee Benefits Plan

Allegations: An investigation by the U.S. Department of Labor’s Employee Benefits Security Administration found that Szajkovics, the chief financial officer for Passages Hospice LLC, and the company violated the Employee Retirement Income Security Act.

The investigation found that – from Jan. 10 to Feb. 7, 2014 – Szajkovics caused Passages Hospice LLC to withhold $15,428 in employee salary reduction contributions intended for the Passages Hospice LLC Dental Plan. The funds were retained in the company’s general fund and used to pay corporate expenses.

Additionally, from Jan. 24 to Feb. 7, 2014, Szajkovics caused Passages to withhold $44,826 in employee salary reduction contributions intended for the company’s Health Plan. Those funds were also retained in the company’s general fund and used to pay corporate expenses.

Resolution: The complaint seeks a judgment:

  • Removing Szajkovics from any position as a fiduciary to the Passages Hospice employee benefit plans and enjoining him permanently from violating the provisions of ERISA and serving as a fiduciary in the future.
  • Ordering Szajkovics and Passages to correct the prohibited transactions and restore to the plans all losses, including lost opportunity costs, resulting from fiduciary breaches for which they are liable.

Court: U.S. District Court for the Northern District of Illinois, Eastern Division (Lisle)

Docket Number: 1:17-cv-00340

EBSA News Brief: 01/17/2017

Media Contact Name: Scott Allen
Email: allen.scott@dol.gov
Phone Number: (312) 353-4727

Media Contact Name: Rhonda Burke
Email: burke.rhonda@dol.gov
Phone Number: (312) 353-4807
Release Number: 17-06-CHI

US Labor Department sues Colorado alarm monitoring company, CEO and fiduciary to recover $82K in missing retirement, health plan contributions

Tuesday, January 10, 2017

Date of Action: Jan. 6, 2017

Type of Action: Lawsuit to recover missing retirement and health plan funds

Name of Defendant(s): Central Security Communications Inc.
Chief Executive Officer Robert Millikin
Fiduciary Howard Klinger

Read More

Date of Action: Jan. 6, 2017

Type of Action: Lawsuit to recover missing retirement and health plan funds

Name of Defendant(s): Central Security Communications Inc.
Chief Executive Officer Robert Millikin
Fiduciary Howard Klinger

Allegations: The U.S. Department of Labor has filed a complaint in the U.S. District Court of Colorado against Central Security Communications Inc., CEO Robert Millikin and fiduciary Howard Klinger to restore more than $82,000 owed to the Greeley, Colorado-based company’s retirement and health plans, as well as additional lost income. The department’s lawsuit asserts that the security and alarm monitoring company, Millikin and Klinger violated the Employee Retirement Income Security Act of 1974 by not making employee retirement contributions and health insurance premiums to the employee retirement and health plans. The lawsuit also alleges the defendants did not collect delinquent outstanding loan repayments owed to the retirement plan.

Resolution: The department seeks a court order that would:

  • Require the company, Millikin and Klinger to restore all plan losses with interest.
  • Appoint an independent fiduciary to administer the plans.
  • Bar Millikin and Klinger from serving as fiduciaries to any employee benefit plan.

Quote: “Central Security Communications and its fiduciaries had a duty to manage and protect the employees’ benefit plans and their assets, yet they failed to do so,” said Mark Underwood, acting director of the Kansas City Regional Office of the department’s Employee Benefits Security Administration. “The department will take every action necessary to restore plan assets that were not preserved properly for the company’s workers.”

Additional Information: Employers and workers can reach EBSA’s Kansas City office at 816-285-1800 or toll-free at 866-444-3272 for help with problems relating to private-sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa/.

Court: U.S. District Court of Colorado

Docket Number: 1:17-cv-00054

EBSA & SOL News Brief: 01/10/2017

Media Contact Name: Juan Rodriguez
Email: rodriguez.juan@dol.gov
Phone Number: (972) 850-4709

Media Contact Name: Chauntra Rideaux
Email: rideaux.chauntra.d@dol.gov
Phone Number: 972-850-4710
Release Number: 17-0038-DEN

US Labor Department sues First Bankers Trust Services, Inc., Sonnax Industries, Inc. and its owners, to recover losses to Vermont ESOP

Thursday, January 5, 2017

MONTPELIER, Vt. – The U.S. Department of Labor is suing the fiduciaries of a Vermont employee stock ownership plan for violations of the Employee Retirement Income Security Act alleging that First Bankers Trust Services, Inc.’s 2011 purchase of the company on behalf of the ESOP from its two previous owners caused the plan to suffer sizable financial losses.

Read More

MONTPELIER, Vt. – The U.S. Department of Labor is suing the fiduciaries of a Vermont employee stock ownership plan for violations of the Employee Retirement Income Security Act alleging that First Bankers Trust Services, Inc.’s 2011 purchase of the company on behalf of the ESOP from its two previous owners caused the plan to suffer sizable financial losses.

Named in the suit are Sonnax Industries, Inc., a Bellows Falls supplier of automotive drivetrain products; Tommy Harmon, its president and chief executive officer; Frederick Fritz, a board member with substantial company control; and First Bankers, headquartered in Quincy, Illinois. Sonnax, Harmon and Fritz hired First Bankers in 2010 as an independent fiduciary to advise the ESOP on whether, and at what price, to purchase shares of Sonnax from Harmon and Fritz. All defendants are fiduciaries of and parties in interest to the ESOP.

An ESOP is a type of retirement plan that is permitted to invest some or all of its assets in employer stock. Participants’ benefits depend on the ESOP buying and selling stock for fair market value, so the department intends to make certain that:

  • The price an ESOP pays for the stock reflects its true market value.
  • Those retained to advise an ESOP about the stock purchase fulfill their fiduciary duties under ERISA.
  • Those who sell their shares to an ESOP do not receive a windfall.

On Jan. 3, 2011, the company purchased all of Harmon’s and Fritz’s stock shares for $48.8 million and issued new shares simultaneously which were sold to the ESOP for $10 million. The department’s Employee Benefits Security Administration investigated and found that First Bankers’ valuation that justified the sales was flawed and its representation of the ESOP during negotiations deficient, resulting in a significant inflation of the purchase price.

In its suit, the department alleges that the defendants violated ERISA’s prohibited transaction and fiduciary duty provisions. It further alleges First Bankers:

  • Failed to protect the ESOP in connection with the plan’s purchase of Sonnax stock from Harmon and Fritz.
  • Relied on a flawed valuation of the stock.
  • Did not prudently investigate the transaction’s merits.
  • Purchased highly leveraged Sonnax stock for far more than fair market value, with the aid and knowledge of Sonnax, Harmon and Fritz.

Sonnax, Harmon and Fritz knew that First Bankers’ work was flawed yet failed to ensure that First Bankers fulfilled its fiduciary duties. They also failed to prevent the ESOP’s purchase at what they knew or should have known was an inflated price, and participated knowingly in First Bankers’ fiduciary breaches and otherwise failed to comply with their own fiduciary duties.

“The department alleges that the defendants breached their fiduciary responsibilities to act solely in the interest of the plan and its participants with care, skill, prudence and diligence, and solely in accordance with the plan’s documents as required by law. Instead, they placed their own interest above those of the plan’s participants who put their trust in the plan, its trustee and other fiduciaries,” said Susan Hensley, EBSA’s regional director in Boston.

“The alleged actions taken by the defendants improperly disadvantaged the ESOP and its participants. We’ve filed this suit so that the losses are restored to the plan and other corrective action will be taken for the benefit of the participants,” said Michael Felsen, the department’s regional solicitor in New England.

The lawsuit asks the court to:

  • Order the defendants to restore to the ESOP all losses incurred as a result of their fiduciary breaches, prohibited transactions and other violations for which they are liable plus appropriate lost earnings.
  • Require them to disgorge any and all plan assets obtained by them as well as any and all profits earned by them from those assets.
  • Enjoin them from serving as fiduciaries, trustees or service providers for any ERISA-covered plan.
  • Enjoin them from future ERISA violations.
  • Enjoin First Bankers Trust Services from receiving any benefits from its indemnification agreements with Sonnax that violate ERISA.

The EBSA’s Boston Regional Office investigated the case, and senior trial attorneys Nathan P. Goldstein and Gail E. Glick and trial attorney Niamh E. Doherty in the department’s Regional Office of the Solicitor in Boston are litigating. Workers, retirees and employers may contact EBSA toll free at 866-444-3272 to speak with a benefits advisor, or through https://www.dol.gov/agencies/ebsa/about-ebsa/ask-a-question/ask-ebsa.

Perez v. First Bankers Trust Services, Inc., Tommy A. Harmon, Frederick Fritz, Sonnax Industries, Inc. and the Sonnax Industries, Inc. Employee Stock Ownership Plan.

Civil Action Number: 5:16-cv-00328-gwc

EBSA & SOL News Release: 01/05/2017

Media Contact Name: James C. Lally
Email: lally.james.c@dol.gov
Phone Number: 617-565-2074

Media Contact Name: Ted Fitzgerald
Email: fitzgerald.edmund@dol.gov
Phone Number: (617) 565-2075
Release Number: 16-2416-BOS

US Labor Department provides updated guidance on proxy voting by employee benefits plans

Wednesday, December 28, 2016

WASHINGTON – The U.S. Department of Labor’s Employee Benefits Security Administration announced today updated guidance for plan fiduciaries with respect to proxy voting. Specifically, the agency released Interpretive Bulletin 2016-01, which withdraws IB 2008-2 and reinstates earlier guidance related to such proxy voting, but with certain updates to clarify what the law requires of plan fiduciaries.

Read More

WASHINGTON – The U.S. Department of Labor’s Employee Benefits Security Administration announced today updated guidance for plan fiduciaries with respect to proxy voting. Specifically, the agency released Interpretive Bulletin 2016-01, which withdraws IB 2008-2 and reinstates earlier guidance related to such proxy voting, but with certain updates to clarify what the law requires of plan fiduciaries.

Employee benefits plans often have large shares in publicly held companies, therefore the agency has long held that it is important for plan administrators to know what their responsibilities are when they vote proxies on those shares or exercise other shareholder rights. The existing guidance to plan fiduciaries has been out of step with domestic and international trends in investment management and has the potential to dissuade fiduciaries from exercising shareholder rights, including the voting of proxies, in areas that are increasingly being recognized as important to long-term shareholder value.

“Plan fiduciaries can often enhance and protect the interest of plan participants and beneficiaries by responsibly exercising their rights as shareholders,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “This guidance removes perceived impediments to the prudent management of plans’ rights as shareholders, and encourages fiduciaries to manage those rights in the best interest of plan participants and beneficiaries.”

Today’s release reinstates earlier guidance, IB 94-2, with key updates, and will better assist plan fiduciaries in understanding and satisfying their obligations under the Employee Retirement Income Security Act with respect to proxy voting and shareholder engagement. The agency was also concerned that, despite the recent guidance on economically targeted investment issues provided in IB 2015-1, statements in IB 2008-2 may cause confusion as to whether or how a plan fiduciary may consider environmental, social and governance issues in connection with proxy voting or undertaking other shareholder engagement activities.

The interpretative bulletin will be published in an upcoming edition of the Federal Register and can also be viewed at https://www.dol.gov/sites/default/files/ebsa/2016-31515.pdf.

EBSA News Release: 12/28/2016

Media Contact Name: Michael Trupo
Email: trupo.michael@dol.gov
Phone Number: (202) 693-6588
Release Number: 16-2376-NAT

Suit seeks funds owed to retirement plan of Maryland company

Friday, December 23, 2016

Date of Action: Dec. 21, 2016

Type of Action: Complaint

Name(s) of Defendant(s): Larry Porter, Susan Porter, SeaBoard Management LLC, SeaBoard Management Inc., and SeaBoard Management Inc. Money Purchase Plan

Read More

Date of Action: Dec. 21, 2016

Type of Action: Complaint

Name(s) of Defendant(s): Larry Porter, Susan Porter, SeaBoard Management LLC, SeaBoard Management Inc., and SeaBoard Management Inc. Money Purchase Plan

Allegations: Based on an investigation conducted by the U.S. Department of Labor’s Employee Benefits Security Administration, the U.S. Secretary of Labor filed a complaint alleging that:

  • On March 1, 1985, SeaBoard Management Inc., a company based in Stevenson, Maryland, established a Money Purchase retirement plan for its employees. 
  • Trustees Larry Porter and Susan Porter breached their fiduciary duties to the plan by failing to take action to recover funds owed to the plan, which were loaned to the company in violation of ERISA. To date, principal and interest owed to the plan on this loan is approximately $332,544. 
  • The trustees failed to take action to recover funds owed to the plan that were loaned to Waskey Investments, a real estate partnership in which Larry Porter owned a 50 percent share, in violation of the Employee Retirement Income Security Act. To date, principal and interest owed to the plan on this loan is approximately $423,486.

Proposed Resolution: The Department is asking the court to:

  • Order the defendants to restore all losses, including interest or lost opportunity costs to the plan, which occurred as a result of the defendants’ breach of their fiduciary obligations.
  • Permanently enjoin Larry Porter and Susan Porter from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, representative, or having control over the assets of any employee benefit plan subject to the ERISA.
  • Appoint an independent fiduciary at the Porters’ expense.

Court: U.S. District Court for the District of Maryland

Docket Number: ­­­­­­­­­­­­ 1:16-cv-04054-ELH

EBSA News Brief:  12/23/2016

Media Contact Name: Leni Uddyback-Fortson
Email:  uddyback-fortson.lenore@dol.gov
Phone Number:  (215) 861-5102

Media Contact Name: Joanna Hawkins
Email:  hawkins.joanna@dol.gov
Phone Number:  (215) 861-5101
Release Number:  16-2402-PHI

New ERISA safe harbor for municipally sponsored IRAs

Monday, December 19, 2016

WASHINGTON – Increasing access to retirement savings opportunities is the surest way to help more of America’s workers secure their financial futures. Today, the U.S. Department of Labor’s Employee Benefits Security Administration is announcing a final rule to assist large cities and other political subdivisions that establish payroll deduction individual retirement account savings programs for workers who do not have access to workplace savings arrangements.

Read More

WASHINGTON – Increasing access to retirement savings opportunities is the surest way to help more of America’s workers secure their financial futures. Today, the U.S. Department of Labor’s Employee Benefits Security Administration is announcing a final rule to assist large cities and other political subdivisions that establish payroll deduction individual retirement account savings programs for workers who do not have access to workplace savings arrangements. The rule amends a similar rule related to state savings initiatives published earlier in 2016.

“More workers saving for retirement now means more financially secure retirees in the future,” said U.S. Secretary of Labor Thomas E. Perez. “This is good for workers and families trying to build their nest eggs, and good for the long-term strength of the economy.”

“We have said many times that there is no silver bullet when it comes to solving the retirement savings issues facing workers and our nation. Increasing access to savings opportunities, improving transparency and reducing conflicts of interest in investment advice are all critically important policy tools that this administration has pursued,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “We hope that today’s rule increasing access to savings opportunities will add to the tools available for working people who want to save for retirement.”

The final rule provides guidance for eligible cities and other political subdivisions to help them design programs by providing a safe harbor describing circumstances in which an employer’s actions in complying with the municipal law do not result in the creation of an Employee Retirement Income Security Act compliant plan. The safe harbor will reduce the risk of ERISA preemption of the relevant municipal laws. By establishing a clear standard, it will also provide certainty to municipalities considering action. Importantly, the rule also protects workers’ rights by ensuring they have the ability to opt out of auto-enrollment arrangements. The rule will go into effect 30 days after its publication in the Federal Register.

Under the final rule, a limited number of cities and other political subdivisions – those with populations at least as large as that of the least populous of the 50 states, that are located in a state that does not already have a payroll deduction IRA plan of its own, that have experience sponsoring a plan for employees, and that meet other criteria laid out in the final rule – are eligible to enact such a program. Representatives from three cities – New York, Philadelphia and Seattle – have publicly expressed interest in potentially establishing programs.

The final rule will be published in an upcoming issue of the Federal Register and can also be viewed here. A fact sheet is available here.

EBSA News Release: 12/19/2016

Media Contact Name: Michael Trupo
Email: trupo.michael@dol.gov
Phone Number: (202) 693-6588
Release Number: 16-2368-NAT

US Labor Department files lawsuit to appoint independent fiduciary to administer 401(k) plan after Los Angeles-area hotel ceased operations

Monday, December 19, 2016

Date of action: Dec. 15, 2016

Type of action: Complaint

Name of defendants: Urban Hotels Inc., doing business as LAX Plaza Hotel
Urban Hotels 401(k) Plan and Trust

Read More

Date of action: Dec. 15, 2016

Type of action: Complaint

Name of defendants: Urban Hotels Inc., doing business as LAX Plaza Hotel
Urban Hotels 401(k) Plan and Trust

Allegations: Based on an investigation conducted by the U.S. Department of Labor’s Employee Benefits Security Administration, the department filed a complaint on Dec. 15, 2016, alleging that the defendants violated the Employee Retirement Income Security Act for failing to act solely in the interest of the participants and beneficiaries of the plan. The department alleges that prior to and at the time Urban Hotels ceased operations, the company failed to take sufficient steps to provide for the prudent and complete termination of the company’s 401(k) plan and trust. The complaint also alleges that the plan’s custodian would not authorize distributions of the remaining plan assets to participants and beneficiaries without direction from a properly appointed fiduciary or court-appointed independent fiduciary.

Plan administrator and trustee Hidebumi Minagawa is no longer residing in the U.S., and plan trustee Hailu Solomon’s whereabouts are unknown. As of Nov. 9, 2016, approximately $41,000 is due to be distributed to the remaining 14 plan participants.

Resolution: The department is seeking the removals of Hidebumi Minagawa as plan administrator and trustee, and of Hailu Solomon as trustee, and the appointment of an independent or successor fiduciary with discretionary authority to administer the plan in order to effectuate its termination and the distribution of the plan’s remaining assets.

Court: U.S. District Court for the Central District of California

Docket Number: 2:16-cv-09262

EBSA News Brief: 12/19/2016

Media Contact Name: Leo Kay
Email: kay.leo.f@dol.gov
Phone Number: (415) 625-2630

Media Contact Name: Jose Carnevali
Email: carnevali.jose@dol.gov
Phone Number: (415) 625-2631
Release Number: 16-2375-SAN

Contact Us

If you would like to speak with one of our Consultants about any of the services that The ERISA Advisory Group provides, please contact: