Benefits July 10, 2023

DOL Targets New Jersey 401(k) Plan for Concrete Companies

Concrete producer Di Ferraro Inc. failed to remit employee withholdings and loan repayments to the plan over six years, the Department of Labor alleges.

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New Jersey concrete manufacturer Di Ferraro Inc. failed to properly transfer employee withholdings for loan repayments and employer matching contributions to its retirement plan repeatedly over several years, the Department of Labor alleged in a July 7 lawsuit brought against the plan’s fiduciaries in U.S. District Court for the District of New Jersey.

The DOL, in the name of Acting Secretary of Labor Julie Su, alleged the defendants—concrete manufacturer Di Ferraro Inc.; company president Mario Ferraro Jr.; and the Crews-Farrell-Mead 401(k) Savings and Retirement Plan—committed six counts of fiduciary breach under the Employee Retirement Income Security Act for violating the fiduciary duties of exclusive purpose, prudence, loyalty, entering into prohibited transactions and engaging in self-dealing.

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“Although Di Ferraro and Ferraro [Jr.] took weekly Plan contributions from employees’ paychecks, they failed to remit all the employees’ contributions to the Plan,” the complaint states. “From January 1, 2015, to December 31, 2021, loan repayments were withheld from some employee paychecks and not properly remitted to the Plan. Additionally, on multiple occasions from January 1, 2015, through December 31, 2021, Defendants failed to send the Plan the required amount of employer matching contributions each year.”

Wayne, New Jersey-based Di Ferraro Inc. manufactures concrete products from a combination of cement and aggregate. Requests for comment to Di Ferraro were not returned.

Employees who contributed to the plan via weekly payroll deductions were promised, by Di Ferraro, that their contributions would be 100% matched up to $1,040 per year, the complaint shows.

“On multiple occasions from January 1, 2015, through December 31, 2021, Defendants failed to send the Plan the required amount of employer matching contributions each year,” the DOL explains.

The sixth claim brought by the DOL alleged co-fiduciary liability against Di Ferraro Inc. and Ferraro Jr., son of one of the company’s owners, Mario Ferraro Sr.

“As fiduciaries to the Plans, Di Ferraro and Ferraro [Jr.] are subject to liability for each of other’s breaches that they knew of but failed to remedy,” the complaint states. “Di Ferraro and Ferraro, in their position of having custody or control over the Plans and their assets, knew of and had the opportunity to prevent or remedy the conduct of each other that caused losses to the Plans.”

Di Ferraro Inc and the Hall Wilbert Company LLC are collectively owned by Ferraro and his parents, Ferraro Sr. and Ann Ferraro, the complaint shows. Ferraro Sr. and Ann Ferraro are not defendants but are parties in interest to the plan under ERISA, according to the complaint.

Di Ferraro and Hall Wilbert are affiliated concrete product manufacturing companies headquartered at the same address in Wayne, New Jersey, the complaint shows. The Crews-Farrell-Mead 401(k) Savings and Retirement Plan provides retirement plan benefit coverage for participating employees from Di Ferraro and Hall Wilbert, according to the complaint.

Although the affiliated companies are connected concrete manufacturers, Hall Wilbert is not a named defendant in the lawsuit, as the company is a party in interest to the lawsuit as an employer of participants in the plan, the DOL explains in the complaint.

In the case, Su v. Ferraro et al., the DOL is requesting that the court order Di Ferraro and Ferraro be removed as fiduciaries; appoint an independent fiduciary for the plan with plenary authority and control over the plan, including but not limited to the authority to calculate the total amount of untimely, unremitted contributions, outstanding loan repayments, missing match contributions and interest lost and/or lost opportunity earnings incurred by the plans because of their violations of ERISA; and Di Ferraro and Ferraro be ordered to restore any and all missing contributions and losses, as calculated by the independent fiduciary.

Compliance July 7, 2023

District Court Rejects Class Certification in Remanded Case Against TIAA

The proposed class of participants in Washington University in St. Louis retirement plans was rejected by the same judge who initially approved it in 2020.

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U.S. District Judge J. Paul Oetken has denied a class certification claim by plaintiffs seeking to represent about 8,000 participants in Washington University in St. Louis retirement plans managed by recordkeeper TIAA in a June 27 opinion in U.S. District Court for the Southern District of New York.

Oetken’s decision came after the case was remanded from the U.S. 2nd Circuit Court of Appeals in December 2022, when a three-judge panel overturned the district court’s class certification on the grounds that individual issues raised by the defense may differ from that of the full class of participants.

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“The Second Circuit vacated and remanded, instructing the Court to consider whether certain ERISA affirmative defenses raised by TIAA would make class treatment unwarranted because individual issues raised by the defenses predominate over those common to the class,” Oekten wrote. “Following further briefing by the parties and reconsideration of the issues in light of the Second Circuit’s opinion, the Court denies Plaintiff’s motion for class certification.”

Haley et al v. Teachers Insurance and Annuity Association of America was filed in February 2017. The complaint focused on retirement plan loan withdrawals administered by TIAA at the request of plan participants.

The plaintiffs, represented by lead attorneys from Berger Montague PC, alleged that TIAA had earned interest off participants’ collateral as compensation for administrating the loans. They argued those earnings were in violation of Section 406 of the Employee Retirement Income Security Act, which prohibits plan fiduciaries from directly or indirectly engaging in a transaction that presents a conflict of interest.

TIAA countered that the actions were permissible under Section 408(b)(17) of the rule, which allows for a plan to engage in actions that pay no more or less than “adequate consideration” for services.

In March 2018, the district court granted TIAA’s motion to dismiss on four of the five counts in the case, holding that the plaintiffs had not plausibly alleged that TIAA was an ERISA fiduciary, according to the court record. The court allowed one claim to continue with TIAA as a non-fiduciary and permitted leave to amend the complaint. The plaintiff then requested class certification, which was granted by Oetken in November 2020.

On appeal, the 2nd Circuit vacated the class certification ruling and remanded the case, arguing that the district court had not properly considered, under Rule 23(b)(3), that the defense’s claims regarding individual participant issues could not be vetted on a class-wide basis, and therefore a class claim was not warranted.

When the case returned to the district court, TIAA argued that evaluating its defense would require the district court to look into each of the 8,000 participants involved in the complaint, according to the court record. Oetken ultimately agreed, deciding against class action certification.

“Determining the adequacy of consideration for each transaction, concerning a variety of ERISA plans, loans of differing amounts and differing time periods, and localized or regional assessments of prevailing interest rates for similar transactions in space and time … swamp common issues,” Oetken wrote.

ERISA attorneys from the law firm of Duane Morris, who were not involved with the case, noted in an analysis that ERISA class actions can be difficult to defend against, as the plaintiffs usually argue that plan management affects all the participants in similar ways. The Haley decision, however, will serve as “an exception to the rule.”

“Defendant was able to show that the case was not about a single policy, but about numerous individual actions,” they wrote. “The decision underscores the importance of probing deeply into a putative class members’ allegations to determine whether they meet the rigorous standards of Rule 23.”

Defendants who are accused of violating Section 406, the Duane Morris attorneys wrote, “must carefully consider the defenses provided by Section 408 and raise them in a timely fashion.”

TIAA declined to comment on the ruling. The New York-based firm was represented by Goodwin Proctor LLP.

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