ERISA lawsuit: Feds sue HR director, now-defunct company over missing 401(k) funds  

As an HR pro, you’ve probably heard about the significant responsibilities that come with acting as fiduciary for a benefits plan.  

According to the DOL, fiduciaries must:  

• Run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.
• Act prudently and must diversify the plan’s investments to minimize the risk of large losses.
• Follow the terms of plan documents to the extent that the plan terms are consistent with the Employee Retirement Income Security Act (ERISA).
• Avoid conflicts of interest. In other words, they may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers or the plan sponsor.

And when fiduciaries fail to uphold these obligations, they can be held personally liable, as this recent case from Baltimore shows.

ERISA suit: Money wasn’t remitted into 401(k)

The DOL’s Employee Benefits Security Administration (EBSA) filed a lawsuit against a now-defunct payroll processing company and its HR director, who acted as the fiduciary for employees’ 401(k) plan.  

According to the complaint, the defendants failed to remit $192,511 in participant and employer contributions to the company’s 401(k) plan from January 2014 through August 2023. They also failed to process requests for participant distributions and rollovers, the EBSA asserted.  

In the EBSA’s view, the defendants’ conduct violated ERISA.  

“Failing to forward employee and employer contributions to company 401(k) plans violates employees’ trust and denies workers the opportunity to earn interest on their investments and prepare for their future,” Philadelphia’s EBSA Deputy Regional Director Norman Jackson said in a press release.  

The complaint seeks restoration of all plan losses, including:

• delinquent employee contributions of $175,902
• delinquent employer contributions of $16,609, and
• lost opportunity earnings of $59,858.

  It also seeks:

• removal of the fiduciary
• appointment of an independent fiduciary paid for by the defendants, and
• preservation of all books and records relating to finances and administration of the company and plan.

This isn’t the first time the feds have pursued legal action against fiduciaries in Baltimore for failing to meet their fiduciary obligations.

As we told you last summer, a Maryland federal court held a company and fiduciary in contempt of court for failing to restore $153,000 to a 401(k) fund. It tacked on a $100 per day civil penalty until the amounts owed are paid in full.