A recent U.S. Department of Labor lawsuit has forced a New Britain, Connecticut company to repay $2.1 million to the company’s retirement plan.
Macristy Industries Inc. and the company president have paid the full amount under a consent judgment and a court order resolving the lawsuit, which alleged violations of the Employee Retirement Income Security Act (ERISA).
According to U.S. Secretary of Labor Elaine Chao, “Workers’ retirement plans are not piggy banks for company executives.” She added, “This legal action restores $2.1 million to these workers’ retirement plan and prohibits the company’s president from ever again serving as a fiduciary of an ERISA-covered employee benefits plan.”
The suit was filed in January, 2007 in the U.S. District Court for Connecticut. It alleged that between 2002 and the present, the defendants improperly transferred up to $2,597,000 in plan assets to company bank accounts. In effect, the company tried to solve its cash flow problems by raiding the employee’s retirement fund. The suit also claims that the company either filed false annual reports or failed to file the annual reports required by law. The reports would have detailed the retirement fund’s financial status to the U.S. Department of Labor, and indicated any problems.
According to the U.S. Department of Labor allegations, the company and its president used some $773,186 for legitimate plan benefits and expenses. The majority of the funds, however, were diverted to pay for normal company operating expenses. This amounted to about $1,823,813 that was misused.
Macristy Industries Inc. is a holding company that owns Connecticut Stamping and Bending Inc., Tube Bends Inc., The Sunrise Realty Corp. and Plumb E-Z Manufacturing Co. The company maintains a cash balance retirement plan for 286 participants.
The defendants acknowledged restoring $1.1 million to the plan after the Labor Department filed its suit. In addition, they have agreed to pay back an additional $1 million to the plan under the current legal settlement. Macristy’s president has resigned as fiduciary to the plan. The court order appointed an independent trustee to manage the plan, and mandated that an actuary be retained to determine the current funding status of the plan. Both of those actions have been completed, according to sources at the U.S. Department of Labor.
In addition, the order prohibits the company president from serving as a fiduciary or service provider to any ERISA-covered plan in the future, and requires the company to pay the costs of the independent trustee. The defendants also were ordered to file all required Form 5500 annual reports as soon as possible. In addition, they must file Form 5330 with the Internal Revenue Service and pay any civil penalties assessed by the U.S. Department of Labor.
This case was first investigated by the Boston Regional Office of the U.S. Labor Department’s Employee Benefits Security Administration (EBSA). The EBSA enforces regulations regarding private sector pension and health plans.
While a number of companies have tried to raid retirement funds in recent years, the U.S. Department of Labor prevents such conduct, and punishes the wrongdoers. In 2006, the EBSA recovered more than $1.4 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Most of those funds were retirement benefits that had been misappropriated by companies.
The Employee Benefits Security Administration (EBSA) is committed to educating and assisting the 150 million Americans covered by more than 700,000 private retirement plans. In addition, this busy agency also assists Americans covered by more than 2.5 million healthcare plans, and a similar numbers of other welfare benefit plans. The agency, originally founded as the PWBA also assists plan sponsors and answers questions from members of the employee benefits community. EBSA promotes voluntary compliance and facilitates self-regulation, working diligently to provide quality assistance to plan participants and beneficiaries.