U.S. authorities are hoping to be able to distribute participant 401(k) assets frozen for almost two years after the failure of New Jersey based machine manufacturing firm.
According to Bergen County's Record newspaper, the DOL has filed a suit against Progressive Machine Co. Inc.'s 401(k) plan, looking for a trustee to help work to distribute the plan's remaining holdings – approximately $81,000, covering 17 employees.
The suit, filed last month in Newark, N.J., was issued more than a year after the company's former owner and plan administrator, Stephen J. Honczarenko, received a three-year probation sentence for failing to file a 5500 form
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In settling the case, Honczarenko has been banned from overseeing another employee retirement fund, and the existing fund has had no fiduciary oversight since Oct. 2010, when he was sentenced.
Honczarenko had been accused of stealing approximately $25,000 of the plan's assets for his own use.
"Employees made contributions to the 401(k) plan in the form of payroll deductions," the May 8, 2009, criminal complaint against Honczarenko said. But the funds "were improperly withheld and not remitted to the 401(k) plan."
Honczarenko said the problems with the fund stemmed from the early effects of the recession on his company, and, having closed the business in 2007, he is trying to rebuild it under a new name.
Honczarenko also said the Progressive Machine Co. bookkeeper failed to make the 401(k) payments, and that when he and his father, who ran and owned the company, found out, their company didn't have enough funds to make up the payments. He said he had already stepped away from the fund when the 5500 form should have been filed, but failed to properly resign as the fiduciary and so was legally liable for filing the paperwork.
"We were hurt in so many different directions," said the younger Honczarenko, adding that the family had already put $1.6 million of its own money into the company, most of which went to the company payroll, when the bookkeeper's error was discovered. He said the employees' 401(k) deductions didn't benefit himself, but were used to keep the company going.
Honczarenko, who is not named as a defendant in the case against Progressive Machine Co. Inc. 401(k) Plan, agreed to pay $108,000 in restitution in his plea. He said he has paid nearly 90 percent of the amount, and will pay the rest when he is able. "This was something that happened in 2006," he said. "We have done everything to the letter of the law since then. And it was an economy-related situation."
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