DOL Sues Defunct Firm for Retirement Asset Distributions

A Department of Labor lawsuit asks a U.S. District Court to remove a defunct Michigan telemarketing company from its position as a retirement plan fiduciary in order to give participants access to their retirement assets, according to the complaint, Martin J. Walsh v. Associated Community Services, Inc. and Associated Community Services 401(k) Profit Sharing Plan and Trust.

Secretary of Labor Marty Walsh is named as the lead plaintiff in the lawsuit against Associated Community Services Inc.—a Michigan company that provided telemarketing services and its 401(k)-profit sharing plan and trust—alleging three counts of fiduciary breach to participants, under the Employee Retirement Income Security Act. ACS was the plan sponsor, the plan administrator and a named fiduciary of the plan, with the attendant powers and responsibilities for management and operation of the plan, at least since September 26, 2016, according to the complaint.

“Since 2019, defendant ACS failed to administer the plan and its assets,” the complaint states. “By defendant ACS failing to administer the plan, participants of the plan have not been able to obtain distributions from the plan of their individual account balances. To date, ACS has not terminated the plan or issued distributions to all of the plan’s participants.”

The DOL alleges that ACS has breached its fiduciary duty to participants on three counts of not operating the plan solely in the interest of the participants and beneficiaries.

The suit asks the U.S. District Court for the Eastern District of Michigan to remove ACS as fiduciary; to appoint an independent fiduciary to terminate the plan and distribute its assets; to compensate the DOL for its action; and to order any further relief.

Fidelity Investments is the trustee, recordkeeper and asset custodian for the plan.

“According to the plan document, if there is a complete discontinuance of contributions, the employer or administrator shall direct the trustee to make distributions to the participants or other persons entitled to distributions,” the complaint states. “According to Fidelity’s Basic Plan Document, the balance of a participant’s vested interest in their account shall be distributable upon their termination of employment with the employer.”

Defined contribution profit-sharing plans accept discretionary employer contributions, and there is no set amount the law requires an employer to contribute, according to an IRS website post outlining the rules and regulations.

Participants’ retirement plan balances not distributed, as of May 3, 2022, totaled approximately $805,732.05 for 43 workers, according to the lawsuit.

The DOL previously brought a separate profit-sharing plan lawsuit against another company in January.

ACS discontinued contributions to the plan and ceased operations in 2019; Richard Cole, the president, treasurer, secretary and director of ACS is deceased; and ACS was officially dissolved as a Michigan corporation on July 15, 2022, according to the lawsuit.

ACS could not be reached for comment, nor was a working website found for the company via internet search. Phone calls to a number listed on the Better Business Bureau website were met with a recording that informed callers the number was disconnected or is no longer in service.

The lawsuit was brought in U.S. District Court for the Eastern District of Michigan. The DOL is represented by Dawn Ison, the U.S. attorney for the Eastern District of Michigan, and Kevin Erskine, an assistant U.S. attorney for the for the Eastern District of Michigan, as local counsel. The complaint was submitted by attorneys Seema Nanda, solicitor of labor; Christine Heri, regional solicitor; and Barbara Villalobos, senior trail attorney.  It is unclear if ACS has representation.

Fidelity did not return a request for comment.