Shuttered Nevada Benefits Trustee Dealt ERISA Lawsuit

A retirement plan participant filed a new lawsuit in federal district court in Texas alleging fiduciary mismanagement against the employee benefits consulting firm that acted as the administrative trustee for the nonqualified deferred compensation retirement plan plaintiff he contributed to, according to the complaint.

The case is Stanley E. McGlothlin v. Benefits for Corporate America Inc. et al., filed in U.S. District Court for the Western District of Texas, San Antonio Division. 

McGlothin is suing the third-party administrator to the plan, Benefits Strategies Group LLC, the third-party plan, Benefits For Corporate America Inc. and Benefits for Corporate America Inc.—the plan trustee—for repeatedly amending the plan without mutual agreement of the sponsor and the trustee, as the trust required. The suit also alleges mismanagement of plan assets and breach of a plan prohibition on loaning funds from the trust.

In 2008, McGlothlin became a participant in the NQDC plan through his company, R&F Industries Inc. and the firm adopted and agreed to participate in the plan provided by Benefits for America, the complaint shows.

The defendants face two counts of breach of fiduciary duty under the Employee Retirement Income Security Act.

Alleged Violations

McGlothlin’s complaint alleges BCA and Benefit Strategies Group improperly invested his retirement contributions.  

The lawsuit alleges plan mismanagement of McGlothlin’s assets by Ronald H. Snyder, the president of BCA and the managing member of Benefit Strategies—after Snyder informed other participants by phone that he had made some “bad choices” and “bad decisions” with the plan’s assets and that the value of the plan’s assets in the trust had “significantly diminished,” according to the complaint.

“Snyder would be a named defendant to this lawsuit, but for the fact that Snyder is currently in bankruptcy, and the bankruptcy automatic stay prevents him from being a named defendant here,” the complaint states.

From 2008 until the end of 2013, McGlothlin made four lump-sum contributions to the plan—totaling $498,550—and has not made any additional contributions to the plan since 2013, according to the complaint.

“BCA and Benefit Strategies invested some or all of McGlothlin’s contributions in illiquid, high-risk investments, contrary to McGlothlin’s stated investment choices and the terms of the Trust,” the complaint states.

From 2008 through 2020, McGlothlin received an annual review from Benefit Strategies that summarized the status of the assets in the plaintiff’s account in the plan, listing him as an active participant in the plan, the complaint states. McGlothlin received the last statement for the year ending December 31, 2020, that showed an account balance of $939,317.82, the filing shows.

McGlothlin is “unable to gain access to his funds and does not know how much, if any, of the $939,317.82 balance in his account remain,” the plaintiff’s complaint alleges.

Snyder, reached this week by telephone, said he is unaware of the complaint in Texas federal court and has not been served with legal papers.

BCA no longer has a functioning website or email address. The corporation was a registered business in Nevada, with principal place of business in Las Vegas, and has since had its corporate status revoked, the filing shows.

Snyder, in an emailed response to a request for comment, said BCA remains an active Nevada corporation “in good standing.”  

Snyder is aware of four separate ERISA lawsuits filed against Benefits for Corporate America: two in California and one each in Tennessee and Utah, he adds.

Snyder denied any responsibility, dismissed the latest complaint as without merit and blamed the participants and their attorneys who have brought lawsuits.

“There is no logical basis for any of these participants to tie up the plan’s resources and time with their litigation,” Snyder says. “There are a significant number of errors in the [Texas] complaint. To me, an interesting article would be about how ERISA-stupid litigation attorneys are.”

ERISA Allegations

The plaintiffs’ complaint alleges two counts of breach of fiduciary duty: one for failure to operate the plan solely for plan participants and beneficiaries and the other for failing to protect participants or to gain redress for them from a practice that violates any subchapter or the terms of the plan   

The breach of fiduciary duty to the participants was “failing to ensure that amounts sufficient to fund the obligation to pay McGlothlin’s deferral account were held in the trust and were not diverted to, or used for, any purpose except payments to participants and beneficiaries,” states the complaint. “Defendants breached their fiduciary duties owed under ERISA and are liable to McGlothlin for any losses to the plan resulting from their breaches.”

In addition, “BCA and Benefit Strategies breached the ‘nonalienation’ provision of the plan by making risky loans of plan assets that caused the loss of several hundred thousand dollars in one instance and the loss of $2.3 million in another instance,” the complaint states.

McGlothlin has asked the court for restitution, in “equitable relief and injunctive relief,” under ERISA Section 502(a)(3), including a surcharge totaling “not less than $939,317.82,” the filing shows.

Snyder blamed “crooks” who stole several million dollars from the company to which BCA had made a secured loan, in the email response, although it was unclear if he was referring to the $2.3 million loss.

Three additional counts were brought under Texas common law against select defendants.

The Memos

In January 2022, the lawsuit states, McGlothlin received a memo from Snyder on behalf of Benefit Strategies—with three additional memos attached. The defendants’ documents were purported to have previously been distributed to plan participants, yet McGlothlin claims he never received any of the previous documents before they were attached to the January memo, according to the lawsuit.

The memo “stated that Snyder and Benefit Strategies ‘inten[d] to shut down the trust and distribute all benefits to participants,’ but it provided no date certain by which benefits would be paid,” and the “amount of assets presently in the trust are insufficient to pay all expected benefits under the plan,” according to the complaint.

Per the January 22 memo, Snyder and Benefit Strategies intended to close the trust with no plans to “pay participants the benefits they are owed,” the complaint states.

The suit also contends that Snyder and Benefit Strategies invested in illiquid investments that were not permitted by the trust, based on a series of memos cited in the plaintiff’s complaint.

The Relief sought

McGlothlin is seeking a jury trial and also wants a full accounting for the plan’s assets, the filing shows.

McGlothlin is represented by attorneys from the law office of Winstead PC, based in Fort Worth, Texas. No counsel for the defendants was listed on the court documents.