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News Release

Labor Department Seeks to Shut Down Abandoned 401(k) Plan

Archived News Release — Caution: Information may be out of date.

Atlanta, Georgia - The trustees of a Durham, North Carolina, 401(k) plan has been sued by the U.S. Department of Labor for abandoning the plan when its sponsoring company, Persimmon IT Inc. ceased operating in May 1999.

In its March 11 suit, the department names the company and plan as well as trustees Virginia Higbee Crum-Jones and Erica L. Zendt, whom the department has been unable to locate. Persimmon IT was a provider of Internet and Intranet-based software to various industries. Its 401(k) plan, established April 1, 1996, had 55 participants and assets totaling $288,000.

Under the Employee Retirement Income Security Act (ERISA), plans are considered by the department to become “orphan plans” when they are abandoned by all fiduciaries designated to manage and operate the plans and their assets. As a result, participants and beneficiaries are unable to receive distributions and to make inquiries about their pension benefits.

The suit asks the court to remove the individual defendants from their positions with the plan, to appoint an independent fiduciary to take over the 401(k) plan as well as any other ERISA-covered plans the company may have sponsored and to distribute the proceeds to plan participants. When these actions are taken, the independent fiduciary would then have the right to terminate the plan.

"This action reaffirms our commitment to protect the hard-earned benefits promised by employers," said Howard Marsh, director of the department’s Atlanta regional office of the Pension and Welfare Benefits Administration, which investigated the case. The suit was filed in the federal district court in Durham.

Employers and workers can contact the Toll-Free Employee & Employer Hotline at 1.866.275.7922 for help with any problems relating to private-sector pension and health plans.

(Chao v. Persimmon IT
Civil Action No. 1:02CV185)

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Archived News Release — Caution: Information may be out of date.

Agency
Employee Benefits Security Administration
Date
March 15, 2002
Release Number
02-47