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News Release

Labor Department Sues Eyeglass Factory Plans’ Official For Failure to Forward Employee Contributions

Archived News Release — Caution: Information may be out of date.

Cincinnati, Ohio - The U.S. Department of Labor sued the fiduciary of the health and flexible spending plans of Eyeglass Factory, Inc.(EGF) of Ferndale, Michigan, seeking payment of contributions withheld from employees’ paychecks but never forwarded to the plans. The suit, filed September 19 in federal district court in Ann Arbor, Michigan, also alleged that Stephen Schaffer, EGF owner and the plans’ fiduciary, failed to maintain fidelity bonds for the plans, as required by federal law.

The suit alleged that from July 1, 2000, to October 1, 2000, Schaffer and EGF withheld and failed to forward to the health plan contributions to be used for health insurance premiums. Also, the defendants allegedly failed to forward some employee contributions to the company’s flexible spending plan from January 1, 2000, through December 4, 2000. The employees’ paycheck withholdings were commingled with the company’s general assets and used for its general operating expenses.

The department is asking the court to order the defendants to make the plans whole, including lost opportunity costs, to correct prohibited transactions in which they engaged, and to appoint an independent fiduciary to oversee the plans once Schaffer has been removed from his position with the plans.

The company, which was in the retail eyeglass business, ceased operations on December 5, 2000. As of July 2000, the health plan had 177 participants in 46 locations throughout Ohio, Michigan, Kentucky and Pennsylvania.

Joseph Menez, director of the department’s Cincinnati Regional Office of the Pension and Welfare Benefits Administration, noted that employers with similar problems, who are not yet the subject of an investigation by EBSA, may be eligible to participate in the Department's Voluntary Fiduciary Correction Program (VFCP). Participation in the VFCP requires employers to make workers whole but allows them to avoid EBSA enforcement actions and civil penalties as well as any applicable excise taxes.

"The VFCP gives plan sponsors a way to come into compliance with ERISA by restoring workers' benefits while avoiding an investigation by EBSA,” said Menez. “It protects workers' health and retirement benefits and allows us to focus our resources on those who seek to avoid compliance." For more information about the VFCP see

Employers and workers can contact the Cincinnati Regional Office at 1.859.578.4680 or EBSA’s Toll-Free Employee & Employer Hotline number, 1.866.275.7922, for help with any problems relating to private-sector pension and health plans. The Cincinnati office conducted the investigation in this case.

(Chao v. Stephen Schaffer, the Eyeglass Factory, Inc.
Civil Action No. 02-CV-60197)

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

Employee Benefits Security Administration
September 27, 2002
Release Number