Compliance August 18, 2006

DoL Removes DC Union in Fiduciary Breach Case

August 18, 2006 (PLANSPONSOR.com) - Federal officials have announced that they have obtained a temporary federal court restraining order, removing a security guard union as fiduciary of its pension and health plans.
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The US Department of Labor (DoL) said in a news release that the order covered the National Association of Special Police and Security Officers (NASPSO), and its executive director, Caleb Gray-Burriss, as fiduciaries.

An investigation, conducted by the Washington, DC district office of the department’s Employee Benefit Security Administration (EBSA), revealed that the defendants violated the Employee Retirement Income Security Act (ERISA) by making numerous, ongoing withdrawals from NASPSO’s   pension plan account starting in September 2004.   To date, Burriss and NASPSO have not accounted for approximately $95,000 in such deductions.

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Filed in the US District Court for the District of Columbia, the temporary restraining order immediately removes Burriss and NASPSO from their positions with the plans, bars them from having control or decisionmaking authority over the assets of any employee benefit plan and freezes all accounts of Burriss and NASPSO that contain plan assets until a court decision is issued, the news release said.

NASPSO is an approximately 800-member labor union representing security guards in the Washington, DC area.   Burriss established and became the union trustee of the pension plan in June 2004 and the health plan on January 2006, according to the government.

Compliance August 17, 2006

Court Applies "Catch-all" Statute of Limitations to Retirees' Claim

August 17, 2006 (PLANSPONSOR.com) - The 6th US Circuit Court of Appeals determined a group of retirees of the United States Enrichment Corporation (USEC) are time-barred from their claim regarding pension benefits that were transferred to USEC's defined benefit plan when they became permanent employees.
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Given the transfer of pension assets was governed by the USEC Privatization Act of 1996, the retirees’ lawsuit filed in 2004 occurred past the four-year “catch-all” statute of limitations under the US Code, according to the appellate court’s opinion. The USEC Privatization Act did not include a statute of limitations provision.

Even if the Act did not put the retirees on notice of the amount of assets that would be transferred to the USEC plan, a plan amendment, effective May 18, 1999, should have put the retirees on notice of their potential claim, USEC asserted, according to the opinion. The amendment stated that assets equal to the accrued benefit for each participant in the Lockheed Martin Energy Systems defined benefit plan would be transferred to the USEC plan and “no other assets or liabilities shall be transferred to the USEC Plan from the [old] Plan.”

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The retirees worked at the Paducah Gas Diffusion Plant (PGDP) and were participants in the pension plans created for PGDP employees. According to the court document, PGDP was operated by various private contractors on behalf of the Department of Energy, including Lockheed Martin Utilities Services. Congress created USEC to run the plant as part of the Energy Policy Act of 1992 and later enacted the USEC Privatization Act in 1996 to clarify the manner and means by which USEC would be privatized.

At the time of the creation of USEC, Lockheed Martin Utility Systems Inc. served as the operating contractor of PGDP, and Lockheed employees participated in a pension plan maintained by Lockheed Martin Energy Systems. USEC initiated a transfer of more than $548 million of pension assets via an agreement between Lockheed and USEC on May 24, 2000. At the time of the agreement, a surplus of funds existed in the pension plan above the amount necessary to cover the vested benefits of plan participants.

The retirees filed their lawsuit on June 29, 2004, against the Department of Energy, Lockheed and USEC, alleging violations of the Privatization Act and the breach of various fiduciary duties under the Employee Retirement Income Security Act (ERISA).They filed the lawsuit following the final transfer of assets to the USEC plan, but, according to the opinion, the district court determined: “Plaintiffs’ contention that their claim accrued on June 30, 2000 is not consistent with Sixth Circuit case law which focuses on the date of an event which should have alerted the typical lay person to protect his or her rights. The Plaintiffs’ decision to wait until the date of the final installment prior to filing suit is identical to the decision of the medical student in Roberson, who decided to wait out the appeals process rather than filing a civil rights suit at the point at which a reasonable person would have acted to protect his or her rights.”

The opinion in Edwards v. US Department of Energy is here .

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