John Dombek III and John Dombek Jr. cannot use personal bankruptcy to avoid complying with a federal court order to restore $69,521 in health-care premiums and retirement plan contributions withheld from the paychecks of employees at several companies that are part of the JJD Industries in violation of the Employee Retirement Income Security Act (ERISA). The recent judgement against the two men in Solis v. John Dombek Jr., John Dombek III, Wisconsin Tool & Stamping Co. 401(k) Profit Sharing Plan & Trust, J.D. Acquisition 401(k) Profit Sharing Plan and Trust, and the JJD Industries Group Health Plan is a reminder to business owners, management and others with discretionary control over employee contributions or other plan assets of the importance of ensuring that all employee contributions withheld from pay and other plan assets are used only for appropriate plan expenses and timely deposited in trust or otherwise appropriately applied. Businesses owners and managers should treat these and other similar judgmentsas 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.
Company Leaders Ordered To Restore Misdirected Monies
A Chicago federal court ordered the two men to make restitution of $69,521 of employee contributions withheld from employee pay that the court ruled the Dombeks mismanaged by failing to ensure the timely deposit of these funds with the plans. See
Dombek III, who is president of the JJD Industries Group, and Dombek Jr. were co-fiduciaries of the Wisconsin Tool & Stamping Co. 401(k) plan and have been ordered to restore $22,164.45 in unremitted contributions and lost opportunity costs to the plan. Dombek III is also liable for an additional $2,222.78 in unremitted contributions and lost opportunity costs to the J.D. Acquisition 401(k) plan.
Dombek III must also restore $45,134.08 in unremitted contributions and lost opportunity costs to the JJD Industries sponsored group health plan. The company contracted with Blue Cross and Blue Shield of Illinois to provide health and dental benefits to the employees of its related companies, including Wisconsin Tool & Stamping Co., J.D. Acquisition Corp., Akorat Metal Fabricators Inc./Smithco Fabricators Inc. and Pavo Inc./Injection Plastics Corp. The companies paid their premiums separately, and premiums were partially funded through weekly employee payroll deductions.
The judgment also bars Dombek Jr. and Dombek III from serving as fiduciaries or service providers to any employee benefit plan subject to ERISA for a period of five years. An independent fiduciary will oversee the termination of the 401(k) plans of both Wisconsin Tool & Stamping and J.D. Acquisition, as well as the distribution of plan assets to eligible participants.
The Dombeks will not be able to claim bankruptcy protection to avoid liability for the judgments. Dombek Jr. and Dombek III both previously had filed for Chapter 7 bankruptcy protection. The Labor Department filed separate complaints to determine the dischargeability of these obligations and seek the enforcement of any monetary judgment against both individuals to restore the funds to the employee benefit programs. On October 5 and October 16, 2012, the U.S. Bankruptcy Court for the Northern District of Illinois granted the Labor Department’s motions for default judgment, finding that the debts Dombek Jr. and Dombek III owed to the plans were not dischargeable in bankruptcy.
Business Leaders Risk Personal Liability When Employee Contributions Used In Company Operations
The judgement is another reminder to business owners and leaders not to allow employee contributions or other plan assets to be used to pay company expenses or otherwise misdirected. The judgment is one many enforcement actions that the Department of Labor regularly takes against businesses and business leaders that allow plan assets to be used for company operations or other improper purposes.
“Failing to administer health insurance premiums properly demonstrates a total lack of concern for employees and their families,” said Steve Haugen, director of the Chicago Regional Office of the Labor Department’s Employee Benefit Security Administration. “Incorporating employees’ voluntary salary contributions into the general assets of a company and failing to forward them to the retirement plan are violations of both the law and the trust workers have placed in their employers.”
The judgement shows 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 to 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 registerto receive future updates about developments on these and other concerns from Ms. Stamer here.
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:
- IRS Plans To Issue 2013 Withholding Guidance By 12/31
- ESOP, Other Employee Plan Investments In Company Stock Land Plans, Fiduciaries, Sponsors & Others In Hot Water
- Confirm Qualified Plans Updated By Reviewing Against 2012 Required Plan Qualification Requirements Change List
- Catch Up On Health Reform & Other Key Employee Benefits & Insurance Issues Emerging Issues and Litigation Relating to Life, Health, Disability and ERISA Symposium In Ft. Lauderdale
- 2013 Standard Mileage Rates Announced
- IRS Shares Rules Allowing Government Plans To Switch Remedial Amendment Cycles
- Reminder To Amend Health FSA Plan Terms To Include ACA $2500 Contribution Before 2013 Plan Year Begins
- Bank’ $1Million Plus Overtime Settlement Shows Risks of Misapplying FLSA’s Administrative Exemption
- Labor Department Serves The Christmas Light Co. & Its Owner With Holiday Season FLSA Lawsuit
- Boston Hides and Furs Ltd. Sued For $1 Million For Alleged Willful FLSA Wage & Hour Law Violations
- 2013 Maximum Yearly PBGC Guaranteed Pension Benefit Amount To Increase Slightly In 2013
- New OCR HIPAA De-Identification Guidance Among Developments Covered In 12/12 HIPAA Update Web Workshop
- Rare Court Order Telling Union To Stop Filing Grievances Example Of Employer Risks When Caught Between Competiting Unions
- IRS OKs Retirement Plans Allowing Plan Loans & Hardship Withdrawals To Hurricane Sandy Victims
- New Employee Smart Phone App New Tool In Labor Department’s Aggressive Wage & Hour Law Enforcement Campaign Against Restaurant & Other Employers
- 12 Steps Every Employer With A Health Plan Should Do Now No Matter Who Wins the Election
- Boost Employee Recognition of Value Of Employer & Other Retirement Savings Tools & Plans
- Texas Landscaper’s $106,000 In Minimum Wage & Overtime Settlement Reminds Employers To Prepare For FLSA Enforcement
- NLRB’s Nailing of Bel Air Hotel Reminder RIFs, Other Reengineering & Transactions Impacting Workforce Requirement Proper Risk Management
- Tighten Employment Disability Risk Management As Obama Declares 12/10 National Disability Employment Awareness Month
- Tighten Disability Discrimination Defenses As National Disability Employment Awareness Month Promises To Whip Up New Claims & Awareness
- Settlement of OFCCP Employment Discrimination Charge Reminder To ARRA, Other Government Contractors Of Heightened Enforcement Risks
- $1.25M NLRB Backpay Order Highlights Risks of Mismanaging Union Risks In Health Care & Others M&A Deals
- As EEOC Steps Up ADA Accommodation Enforcement, New DOD Apple App, Other Resources Released
- $1.5 M HIPAA Security Breach Resolution Agreement Shows Looming HIPAA Risks
- Labor Risks Rising For Employers Despite NLRB Loss Of Arizona Secret Ballot Challenge
- USI Advisors Will Pay $1.27 Million To Settle Charges It Violated ERISA Fee Disclosure Requirements
- Wal-Mart Settlement Shows ADA Risks When Considering Employee Return To Work Accommodation Requests & Inquiries
- Record $2.3 Million+ H-2A Backpay Order Plus Civil Money Penalty Reminds Businesses Employing Foreign Workers To Manage Compliance
- Supreme Court Decision Puts Health Plans Under Fire To Complete ACA-Required Summary of Benefits & Communications & Other Health Plan Updates
- $27M+ Settlement Highlights Fiduciary Risks Plan Sponsors & Fiduciaries Risk If Plan Vendors, Compensation Improperly Set
- Employers & Plan Fiduciaries Reminded To Confirm Credentials & Bonding For Internal Staff, Plan Fidiciaries & Vendors Dealing With Benefits
- HIPAA & Texas Law Require HIPAA Training
- EBSA Updates Guidance On Fee Disclosure Requirements For 401(k) Plan Brokerage Window Arrangements
- Federal Mandate That Employer Health Plans Must Cover 100% Of Contraceptive, Other Women’s Health Services With No Cost Sharing Now Effective
- Use NIH & Other Free Government Resources To Help Round Out Wellness Programs
- OCR Hits Alaska Medicaid For $1.7M+ For HIPAA Security Breach
- Model Language May Aid Section 83(b) Elections Even As Executive & Other Special Compensation Carry Growing Liability Traps
- IRS To Offer Help For U.S. Citizens Overseas With Foreign Retirement Plans, Dual Citizenship Tax Issues
- New EEOC State Discrimination Charge Data Helpful Employer Risk Assessment Tool Discrimination Exposures Grow
- IRS Changing Individual Taxpayer ID Number Application Requirements
- Insurer Group Health Inc. To Refund $500,00+ & Change Claims Practices To Settle NY AG Charges It Wrongfully Denied Coverage
- NLRB Moves To Promote Non-Union Employee Use of Collective Action Rights By Launching Webpage
- Making Wellness Work On A Shoestring Budget
- Update Health Plans For Expanded MHPAEA & Health Care Reform Mental Health Mandates
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.
©2012 Cynthia Marcotte Stamer, P.C. Non-exclusive license to republish granted to Solutions Law Press. All other rights reserved.