Businesses owners and managers should treat last week’s judgment against a California fruit and nut supplier Western Mixers Inc. and its officers as a wake-up call to meet employee benefit funding obligations, not to use plan monies for company operations and to take other required steps to make sure that retirement, health and other employee benefit plans moneys and other responsibilities are properly handled.

Under a judgment entered in Solis v. Frank L. Rudy et. al. and Western Mixers Inc. Money Purchase Pension Plan, Western Mixers Inc., its owners and officers will pay a total of $1,287,901 to the company’s pension plan, plus a 20 percent penalty to the Department of Labor.

Following an investigation by the Employee Benefits Security Administration (EBSA), the Department of Labor sued Western Mixers Inc. and two officers who served as trustees of the plan for failing to make approximately $952,511 in mandatory employer contributions for the benefit of participants and beneficiaries and improperly using plan monies in the company’s business operations. Investigators also found that the same two officers as well as the company’s chief financial officer made $565,000 in unauthorized withdrawals from the plan accounts, commingling those funds in the company’s general accounts and using them for the benefit of the business. 

Labor Department officials sued the company, and the officers for violation of the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA).  ERISA generally requires that plan trustees and other plan fiduciaries carry out duties with respect to an employee benefit plan assets prudently for the exclusive benefit of participants. 

Pursuant to the consent judgment, the company and its officers admitted to violation of ERISA.  During the course of the investigation leading up to the lawsuit, the company previously repaid to the plan $485,000 of the total funds identified as missing by the Labor Department.  According to an announcement of the U.S. Department of Labor on May 14, 2012, Midwest Mixers Inc.’s officers agreed to repay $802,901 to participants’ accounts within 10 day of the judgment.

In addition to repaying the missing funds with interest, defendants also must pay a penalty equal to 20 percent of the recovered amount.  The court also has appointed an independent fiduciary to terminate the plan and to collect, marshal, pay out and administer plan assets. Frank L. Rudy and David H. Bolstad, owners of the company, are removed as plan trustees and fiduciaries. Together with Robert J. Fischer, Western Mixers, Inc.’s chief financial officer, they are permanently enjoined and restrained from violating ERISA and from serving as fiduciary or service providers to any ERISA-covered plan in the future.

The Western Mixer’s judgement demonstrates that owners, operators and managers of businesses that exercise discretion and control over the funding, investment or administration of employee benefit plans or their assets face significant liability for failing to properly fulfill their responsibilities with respect to their employee benefit plans.  Businesses, their owners, board members, officers, and other members of management making decisions about the maintenance, funding, administration, termination, hiring or appointment of fiduciaries or service providers or other matters impacting the employee benefit plan should ensure that they understand the potential implications and responsibilities associated with these activities for themselves and their companies.  individuals who have authority or responsibility for employee benefit plans who also perform or take part in the performance of other company management functions also should pre-educate themselves about when ERISA may require that their plan responsibilities be put before otherwise applicable responsibilities to their company, appropriate processes for documenting decisions and activities and other procedures that can help position activities to mitigate exposures and promote defensibility.

For Help or More Information

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices or with other employee benefits, human resources, health care or insurance matters, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters. 

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals.  A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns. 

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations.   She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications.   You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

• Company Executives, Plan Sponsors & Others May Face Personal Liability When Others Defraud Plans or Mismanage Employee Benefit Plan Responsibilities
• Plan Administrator Faces Civil & Criminal Prosecution For Allegedly Making Prohibited $3.2 Million Real Estate Investment
• Employee Plan Fee Disclosure Rules Clarified
• HHS OIG Finds The New York Hotel Trades Council and Hotel Association of New York City, Inc., Health Benefits Fund Reported Unallowable Costs on 2009 Medicare Cost Report
• New Mental Health Parity Resources Released In Celebration of Mental Health Awareness Month
• ERISA Advisory Opinion Addresses If Connecticut Group Health Plan Plan Is “Government Plan”
• Labor Department Annual Self-Insured Health Plan Report To Congress Released
• NLRB Challenges Mandatory Arbitration or
• Comment On IRS Proposals On Determing Health Plan Minimum Value By June 11
• EEOC Sues Wendy’s Franchisee For Disability Discrimination
• Brokerage Firm To Pay $630,000+ To Benefit Plans To Settle DOL Charges It Wrongfully Steered Clients To Investments
• Latest $100,000 HIPAA Resolution Agreement Nails Physician Group,
• DC Court Enjoins Implementation of NLRB Poster Rule
• Health Plans Should Act Quickly To Prepare Affordable Care Act Required Summary of Benefits & Communications & Update Other Health Plan Communications
• Group Health Plans & Insurer To Get More Time To Meet Affordable Care Act Summary of Benefits and Coverage Requirements
• CMS Final Medicare Rule Imposes Many Conditions On Access To Medicare Claims Data To Evaluate Providers & Suppliers
• OSHA Updates Safety Resources To Prevent Construction, Other “Top 10″ Exposures
• OSHA Silo Safety Citations Heads Up To Grain Operators To Manage Safety
• OSHA Updates Safety Resources To Prevent Construction, Other “Top 10″ Exposures
• EBSA Releases Collection of New M-1 and Other Guidance Impacting Multiple Employer Welfare Plans
• New Obama Administration Affirmative Action Guidance Highlights Organization’s Need To Tighten Nondiscrimination Practices
• Incentives To Get Employee Into Wellness Education Requires Legal Risk Management
• HR Key Player In Managing Rising Risk of Disability, Other Discrimination Suits Under Obama Administration Justice Department
• HHS Chides Insurer For “Excessive” Premium Increases After Affordable Care Act Rate Audit
• IRS U-Tube Video Discusses 2012 Flexible Benefit Plan Rule Change
• Employers Considering Using New IRS Voluntary Worker Classification Settlement Program To Resolve Payroll Tax Risks Must Also Manage Other Legal Exposures
• Participant Notification Added To Required Procedures For Church Plan Determination Letter Requests
• HHS Credits Affordable Care Act Adult Dependent Child Coverage Rule With Getting 1 Million Young Adults Health Coverage
• 2010 Webcast Series on Federal Employer Employment of Persons With Disabilities Planned
• EBSA Plans To Include Health Care Reform Compliance In Health Plan Audits Beginning In FY 2012; Disputes OIG Criticism Of ACA Enforcement Efforts
• New Labor Department Video Tries To Educate Young Workers About Benefits & Benefit Rights
• Stamer Named Fellow In American College of Employee Benefits Counsel
• ABA TIPS Section Appoints Cynthia Marcotte Stamer Vice Chair of Employee Benefits General Committee
• Affordable Care Act To Require Health Plans Cover Contraception & Other Women’s Health Procedures In 2012
• EEOC Finalizes Updates To Disability Regulations In Response to ADA Amendments Act: Employers Should Manage Risks  
• Employer Charged With Misclassifying & Underpaying Workers To Pay $754,578 FLSA Back pay Settlement
• NLRB Settlement Shows Care Necessary When Employers Use Social Networking & Other Policies Restricting Employee Communications
• Wage & Hour Law Settlements Highlight Rising Wage & Hour Risks of U.S. Employers
• OCR Requires Rhode Island DHS To Provide Translation, Other Services For Limited English, Other Language Impaired Accommodations

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available at ww.solutionslawpress.com. 

THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2011 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.