The U.S. Department of Labor filed a complaint in federal court seeking to restore $256,457, plus lost opportunity costs, to the Heartland Foods Inc. 401(k) Profit Sharing Plan. Based on an investigation by the department's Employee Benefits Security Administration, the co-owners of the company failed to properly manage the assets of the plan by comingling employee contributions with the company's general operating accounts, in violation of the Employee Retirement Income Security Act.
"Incorporating employees' voluntary salary contributions into the general assets of a company and failing to forward them to their retirement plan is a violation of the law and the trust workers have placed in their employers," said L. Joe Rivers, director of EBSA's Cincinnati Regional Office, which conducted the investigation. "The Labor Department is committed to helping workers obtain their rightful benefits so that they can continue to provide for themselves and their families during retirement."
The department alleges that from Jan. 1, 2008, through Dec. 31, 2010, the owners, with knowledge of each other's actions, withheld $85,232 in contributions and loan repayments to the plan from workers' paychecks and commingled those funds with the general assets of the company. The funds were never remitted to the plan.
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Additionally, from July 15 through Dec. 12, 2008, they allegedly transferred or caused to be transferred $171,225 in plan assets into a checking account in the company's name. Those funds were never remitted to the plan.
Finally, in January 2011, the owners distributed one of the owner's own plan accounts to him and distributed another individual account to a participant, exceeding the allowable distribution limit by $21,610.
As of April 30, 2011, the plan had 35 participants and $228,393.72 in assets, the latest data available.
The complaint seeks the restoration of all plan losses for which the defendants are liable, with appropriate interest. It also seeks to order them to correct the prohibited transactions and to permanently enjoin both from serving as fiduciaries or service providers to any employee benefit plan subject to ERISA. Additionally, they would be required to disgorge any profits received as a result of the prohibited transactions. An independent fiduciary would be appointed to administer the plan.
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