DOL Announces Enforcement Actions for Abandoned Plan and Missed Contributions

A pair of investigations by the Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) have led courts to order plan sponsors to restore retirement contributions for workers at a Michigan electronics repair store and a now-defunct California construction company.

The U.S. District Court for the Northern District of California has issued a default judgment against Clawson Construction Inc. following an investigation by EBSA that found the company failed to name a successor trustee, and plan participants had no one to administer the plan and authorize distribution of their funds when the company closed after the 2018 death of its owner and sole trustee.

Sixteen retirement plan participants will receive almost $1 million in assets as a result of fiduciary breaches under the Employee Retirement Income Security Act (ERISA), says EBSA San Francisco Regional Director Klaus Placke.  

“The U.S. Department of Labor acted to get these employees access to their hard-earned retirement funds,” Placke says. “Employees place their trust in, and count on, employer-sponsored benefit plans to fund their retirements.”

After EBSA investigators determined that the company’s owner failed to name a successor trustee, the EBSA regional solicitor of labor filed a complaint alleging the company abandoned the plan.

Separately, the DOL announced a judgment under ERISA against Gibson Television Service Inc., as the company failed to forward employees’ 401(k) retirement plan contributions to their accounts.

U.S. District Court Judge Laurie J. Michelson for the Eastern District of Michigan signed a consent order and judgment appointing AMI Administrators Inc. as an independent fiduciary to the plan and authorized AMI to reallocate $50,764 from the defendants’ individual plan accounts for the unremitted funds and lost opportunity costs to the accounts of the remaining participants and plan beneficiaries to ensure that participants’ accounts will be made whole, the DOL states.

The court order also authorized AMI to reallocate $3,570 from the defendants’ individual accounts to cover plan expense, and it bars the defendants from serving as fiduciaries to ERISA-covered plans in the future.

The court action follows an EBSA investigation that found the president and the director of Gibson Television Services Inc. failed to remit and/or forward employee contributions “in a timely manner” to the company retirement plan from January 2016 through August 2019, the DOL states.  

“When fiduciaries fail to act with integrity in their obligations to the hard-earned retirement savings of participants, it puts the future savings of hard-working employees and the viability of their retirement plan in jeopardy,” says EBSA Cincinnati Regional Director L. Joe Rivers. “[EBSA] is committed to ensuring the integrity of employee benefit programs and holding those who violate the law accountable.”

Clawson Construction Inc. and Gibson Television Service Inc. have not yet responded to requests for comment about the judgments.

Earlier this month, DOL Secretary Marty Walsh filed a lawsuit in the District Court for the Southern District of New York against Velo Corp. of America, its plan administrator and its plan trustee alleging breaches of fiduciary duty under ERISA. The lawsuit alleges that the New York City courier failed to remit employee contributions to its 401(k) profit-sharing plan.