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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921.
The U. S. Department of Labor today sued an official of
Job Shop Technical Services, Inc. of Farmingdale, N. Y., for failing to deposit
employee contributions owed to the company's 401(k) plan. The DOL investigation
discovered that about $2.7 million of contributions from as many as 300
participants may have been improperly used.
Simultaneously with the filing of the lawsuit, the
department served a motion seeking immediate removal of the plan trustee.
The suit is part of a nationwide enforcement program by
the department's Pension and Welfare Benefits Administration (PWBA), the agency
which enforces federal pension law. More than $2.6 million in health and
retirement contributions has been recovered since January 1995, benefitting
more than 2,800 workers and their families. PWBA is continuing its efforts to
eliminate misuse of employee contributions toward pension and health benefits
through investigations of 416 open civil and criminal cases.
"We want to make sure that money workers put aside for
their retirement and health benefits is not misused," explained Secretary of
Labor Robert B. Reich. "This program is aimed at protecting workers and their
pensions and making sure that companies follow the law in dealing with their
money."
In this, the largest case to date, Ralph Corace, trustee
of the Job Shop 401(k) plan, and Job Shop itself were charged with failing to
forward employee contributions to the company's 401(k) plan for the last two
years.
Job Shop operated as an employee leasing company for
engineers and consultants nationwide and maintains a 401(k) plan for 755
participants. The plan continues to hold approximately $4.3 million in
assets.
The lawsuit resulted from an investigation by the New York
Regional Office of PWBA into violations of the Employee Retirement Income
Security Act (ERISA). The labor department's New York Regional Solicitor's
Office is handling the litigation.
The department is seeking to restore all losses suffered
by the plan and participants with interest; replace both Corace and Job Shop
with an independent trustee and to permanently bar them from serving any plans
covered by ERISA.
The ongoing enforcement program includes investigations
into 401(k) plans, health benefit plans for which employers pay claims out of
corporate assets or through insurance premiums and plans which provide extended
health coverage under the Consolidated Omnibus Budget Reconciliation Act
(COBRA). The principal objective in targeting these cases is to ensure that
employee contributions made to plans are available to pay benefits and not
misused by employers for personal or corporate gain.
Besides violating ERISA, diversion of such contributions
may also violate various federal and state criminal laws. In pursuing cases
involving theft of employee contributions, PWBA is working with both federal
and state prosecutors. In the past nine months, criminal actions have been
filed against 10 persons in five states. More than $160,000 is involved in the
alleged thefts.
PWBA Assistant Secretary Olena Berg called the diversion
from plans "particularly callous. It is an abuse that threatens the well- being
of workers and their families. PWBA will vigorously enforce the law nationally
and work with federal and state prosecutors to bring legal actions to protect
money set aside to pay for retirement and health care."
The pension agency is attacking the misuse of employee
contributions on several fronts. An administration legislative proposal would
require that accounting professionals automatically report certain criminal
actions by plan officials. The proposed Enforcement Improvement Act of 1995
would require accountants who audit employee benefit plans to notify the
department within five business days of any irregularities involving the
administrator or senior officials.
"The proposals would serve as an early warning system in
the department's efforts to curtail such criminal acts as theft of employee
contributions," Berg stated.
The complaint was filed Oct. 18 in the federal district
court in Brooklyn, N. Y.
Archived News Release--Caution:
information may be out of date.
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