Attorneys acting on behalf of the U. S. Department of Labor recently announced that they have recovered more than $1 million in misappropriated employee benefit funds from a Michigan business.
In two successful judgments against Prime Care Services of Southfield, Michigan, the agency gained assets totaling $1,155,943 for the company’s 401k retirement account and pension plans. The funds recovered will be distributed among the plan participants.
“Workers and their families have been counting on these benefit plans to help fund their retirements,” said Secretary of Labor Elaine L. Chao. “Fortunately in this case the department was able to recover all of the money in the benefit plans, more than $1.1 million, and it will be distributed to the participants and beneficiaries.”
Prime Care offered in-home healthcare services for elderly and disabled individuals in Washtenaw County before going out of business.
Two lawsuits filed in Detroit by the U.S. Department of Labor alleged that Paterno Doreza, co-owner of Prime Care Services, failed to take steps to distribute the plan assets to workers, after the company went out of business. On November 30, 2006, the company’s 401k had 77 participants and $570,294.42 in assets. The pension plan had $585,648.75 in trust for 64 participants. Doreza has admitted no wrongdoing in the matter.
Default judgments in both suits appoint an independent fiduciary to manage the plans, liquidate the assets and distribute them to the participating workers. In an unusual move, the Dept. of Labor did not request that Doreza be enjoined from ever serving as a plan trustee again, perhaps because the business went under.
Most employees trust that their retirement, 401k and other benefit plans are secure. Tragically, this is often untrue. In 2006 alone, the U.S. Department of Labor recovered $2.6 Billion in misappropriated employee benefit funds. That number may be just a fraction of what was stolen by unscrupulous employers.
The ERISA, Employee Retirement Income Security Act of 1974, sets minimum standards that employers must abide by for employee retirement accounts. The law was later amended to include other types of employee benefit accounts, including healthcare and profit-sharing accounts.
Earlier this year, a Miami company raided $1.1 million from employee profit-sharing accounts to pad its operating fund.
In July, a New Britain, Connecticut firm was ordered to repay more than $2.1 million in funds that it had misappropriated from the employee retirement fund. According to sources at the Department of Labor, the company tried to solve its cash-flow problems by stealing from its employees.
That caper sparked unusually vitriolic words from the normally sedate 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.”
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, 401k, 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.