DOL sues to restore more than $34 million in pension funds
By Amanda McGrory
The U.S. Department of Labor is suing Michigan-based vehicle parts manufacturer Metavation LLC to restore more than $34 million in assets to two pension funds that were allegedly used in violation of the Employee Retirement Income Security Act.
George Hofmeister, chairman and director of Metavation, which is a subsidiary of Lexington, Ky.-based Revstone Industries LLC, and Bernard Tew, managing director of Tew Enterprises LLC and Bluegrass Investment Management LLC are named in the lawsuit. Tew Enterprises and Bluegrass Investment Management are named because they acted as investment advisers to the two plans.
"Retirees who rely on pension plans should not have to worry about whether these funds are secure," says Secretary of Labor Hilda L. Solis. "That is why those who are entrusted with managing pension funds are held to the highest legal standards and will be held accountable by the Labor Department if they violate that trust."
The lawsuit comes after an investigation conducted by the DOL’s Employee Benefits Security Administration, and multiple ERISA violations were discovered from as early as February 2009. Among the violations are prohibited loans to related companies within the Revstone Industries corporate family, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from companies within Revstone Industries, prohibited purchase of investments from adverse parties, payment of excessive fees to services providers, and the improper allocation of income and expense payments between the pension plans.
According to the lawsuit, approximately $12.1 million from the Hillsdale Salaried Pension Plan and approximately $22.5 million from the Hillsdale Hourly Pension Plan were improperly used because of the defendants’ practice of prohibited transactions.
In total, the plans report having assets valued at about $36 million, and 367 participants are included in the salaried plan and 1,161 participants are included in the hourly plan, based on the latest data available from November 2010.
"The Department of Labor is committed to protecting the assets of workers' pension plans from misuse by plan fiduciaries and service providers," says Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. "These workers are relying on their money being there for them when they retire. Our aim is to make this situation right."
Under the lawsuit, the DOL is asking the court to order the defendants to make up for all prohibited transactions related to the loans and use of plan assets, reinstate any losses to the plans because of fiduciary breaches and transfer to the plans all gains that came from their ERISA violations. Additionally, the lawsuit is asking for the court to remove the defendants as plan fiduciaries, ban them from acting as fiduciaries or service providers to all future plans covered by ERISA and name an independent fiduciary to administer the plans.
Originally published on BenefitsPro.com