Compliance January 9, 2024

DOL Sues 2 Maryland Plan Sponsors

The Department of Labor has filed complaints against two separate plan sponsors, alleging identical fiduciary breaches.

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The Department of Labor sued two separate plan sponsors in Maryland federal court on January 8, alleging seven breaches of the fiduciary duty to participants, under the Employee Retirement Income Security Act, by the defunct Jones Dykstra and Associates Inc. 401(k) Profit Sharing Plan and the defunct iProcess Online Inc. 401(k) plan.

The DOL charged the plan sponsors with breaches of their duty to operate the employer-sponsored retirement plans in the sole interest of participants, according to the separate complaints.

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Both “Defendants … did not remit all employee contributions to the plan, instead allowing the money to remain unsegregated in the company’s general operating account,” the DOL alleges.

The regulator alleges fiduciaries breached their duties—to the respective retirement plan participants—of exclusive purpose, prudence, and loyalty, and that misconduct caused both plans to enter into non-exempt, prohibited transactions and engage in self-dealing, state the separate complaints.

“Specifically, co-owners and fiduciaries Keith Jones and Bryan E. Dykstra failed to remit $43,894.76 in participant and employer contributions to the company’s 401(k) profit sharing plan,” according to a DOL press release about the Su v Jones Dykstra and Associates Inc. et al. case.  

The DOL alleged against each plan that the same retirement plan misconduct occurred during distinct periods.

For allegedly failing to remit all employee contributions to the plan, allowing the money to remain segregated in the company’s general account from 2016 through 2021, the DOL sued fiduciaries of the Jones Dykstra and Associates Inc. retirement plan. It claimed the same breach against the iProcess Online Inc. 401(k) plan from approximately 2014 through 2021, according to the separate complaints.

The complaint against iprocess did not specify how much money was allegedly not remitted on behalf of the plan.

Jones Dykstra and Associates, Inc. provided computer forensics, electronic evidence discovery, litigation support and commercial security training to commercial and government clients. Founded in 2007, the company was headquartered in Elkridge, Maryland, and established the profit-sharing plan in 2011.

Baltimore-based iProcess Online Inc. is a payroll processor that established the company’s 401(k) plan in 2009.

Jones Dykstra’s profit-sharing plan included four participants with a combined $175,941 in retirement plan assets, as of the plan’s most recent Form 5500 filing, in 2016. The iProcess Online 401(k) plan comprised 16 participants with $216,820 in retirement plan assets, as of the plan’s 2013 Form 5500.  

Neither Jones Dykstra and Associates nor iProcess Online operate working websites with contact information.

Representatives of the DOL did not comment on the lawsuits.

Jones Dykstra and iProcess Online were sued in U.S. District Court for the District of Maryland. Neither complaint included counsel for the defendants.

The recent case against iProcess is Julie A. Su v iProcess Online Inc. et al.

The DOL’s complaint was not the first time fiduciary breaches were alleged against the iProcess Online 401(k) plan, according to court documents. In 2022, former iProcess employees, including Brian Mahoney, brought a class action lawsuit against iProcess Online Chief Operating Officer Michelle Leach Bard. The lawsuit alleged that the plan failed to pay workers a portion of their earned wages plus a promised employer matching contribution into their company-sponsored 401(k) accounts.

In 2023, U.S. District Chief Judge James K. Bredar ruled in favor of Mahoney and the class of defendants, awarding $559,304 in compensatory and punitive damages.

Compliance January 9, 2024

Julie Su Nomination Returns to the Senate

The uncertainty atop the Department of Labor is especially relevant amid the financial industry’s response to the controversial retirement security proposal.

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President Joe Biden re-nominated Julie Su for Secretary of Labor on Monday. Su has been acting secretary of Labor since March 2023.

Su’s nomination passed through the Senate Committee on Health, Education, Labor and Pensions in April by an 11 to 10 vote. Her nomination then stalled in the Senate, and a full vote was never held. Presidential nominations must be renewed at the start of a new year.

Her tenure of Secretary of Labor in California was criticized by Republicans at that hearing, especially the state’s unemployment program and a new independent contractor definition rule that she implemented in California.

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In September, Senate Republicans introduced a bill, the Advice and Consent Act, which would require nominees to step down 210 days after their nomination if they have not been approved. A vote has not yet been held on that legislation.

After the Department of Labor’s retirement security proposal—sometimes called the fiduciary proposal—was proposed on October 31, some commenters argued that the DOL does not have the authority to finalize rules under an acting secretary. A letter from the American Securities Association stated that “If the proposals are approved by Julie Su, who is purporting to be the Acting Secretary of the DOL, they will be void and unenforceable because Ms. Su was not confirmed by the Senate as required by the Appointments Clause.”

Under current law, it is unclear what authorities an acting secretary possesses. An opinion issued by the Government Accountability Office argued that if the Secretary of Labor resigns, as Julie Su’s predecessor Marty Walsh did, then the deputy secretary “shall perform the duties of the Secretary until a successor is appointed.” Su had previously been confirmed as Deputy Secretary of Labor.

Hearings to re-consider Su’s nomination have not yet been scheduled.

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