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January 10, 2003
DOL Alleges Misuse of Pension Funds
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"Plan officials have a duty to manage and protect employees' benefit plans and their assets," says Joseph Menez, regional director in Cincinnati for the Labor Department's Pension and Welfare Benefits Administration (PWBA). "Our action today is designed to restore the plan assets that were not properly preserved for the company's workers."
The Labor Department filed suit January 9, 2003, in federal district court in Cleveland against John P. Rice and Molly Rice for violating the Employee Retirement Income Security Act (ERISA). The defendants allegedly failed to remit employee contributions to the company's pension and health plans at various times during March to June 2001. The assets were retained with the corporate assets of Ohio Industries and used to pay business expenses, according to the suit. The defendants also allegedly failed to obtain a fidelity bond as required by ERISA.
The department's suit seeks a court order to compel the defendants to reimburse all losses to the plans with interest and correct any prohibited transactions. It would require Molly Rice to obtain and maintain fidelity bonds for the plans until the plans are terminated, and also asks that the defendants be permanently barred from serving as fiduciaries to any plan governed by ERISA, replacing Molly Rice with an independent fiduciary to oversee the plans.
Ohio Industries was placed in Chapter 11 bankruptcy on October 9, 2001. The plans covered as many as 177 employees. As of March 31, 2001, the Ohio Locomotive Crane Co., Inc. Savings Investment Plan had $1,964,061 in assets. On June 30, 1999, Plymouth Industries merged with Ohio Locomotive Crane Co., and the company subsequently became Ohio Industries.
Employers with similar problems, who are not yet the subject of an investigation by PWBA, 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 PWBA enforcement actions, civil penalties and applicable excise taxes.
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