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Compliance August 5, 2019
Pension Plan Sponsor Dupes Employees Out of ‘TPA Fee’
A business owner who sponsored pension plans for his employees pleaded guilty of charges that he deducted a “third-party administrator fee” from employees’ pay, but used the money for personal expenses.
Reported by Rebecca Moore
The owner and operator of Ferguson Electric and Ferguson Mechanical, both headquartered in Plainville, Connecticut, waived his right to be indicted and pleaded guilty to one count of money laundering stemming from a scheme in which he stole more than $3.3 million dollars from his employees.
According to John H. Durham, United States Attorney for the District of Connecticut, between approximately 2013 and 2017, the pension plan sponsor caused to be deducted approximately $1.60 to $3.15 per hour from each of his employee’s fringe benefits package as a “third-party administrator fee” for the employees’ pension plans. He knew that the funds were not used to cover any administrative fees for the employees’ pension plans.
Instead, the “third-party administrator fee” was paid to TPA of Connecticut, a company that the plan sponsor established and controlled. TPA of Connecticut, in turn, sent the monies to DJS Associates, a Florida company that the plan sponsor formed for the purported purpose of performing business-consulting services for him and his companies. However, no such services were performed and he used the funds for personal expenses.
Through this scheme, the plan sponsor stole a total of $3,357,516 from more than 300 employees.
A federal district court judge scheduled sentencing for October 24, at which time the plan sponsor faces a maximum term of imprisonment of 10 years.« Retirement Plan Non-Participants Likely to Participate Later