U.S. Labor Department sues executive of defunct Newburgh, NY, employer to restore funds to company SIMPLE IRA retirement plan

NEW YORK - The U.S. Department of Labor has sued an officer of defunct Finnegan's Moving & Warehouse of Newburgh, N.Y., for failing to forward delinquent employee and employer contributions to the company's savings incentive match plan for employees individual retirement account, or SIMPLE IRA plan in violation of the Employee Retirement Income Security Act.

The lawsuit was filed in the U.S. District Court for the Southern District of New York following an investigation by the Labor Department's Employee Benefits Security Administration. The suit alleges that defendant Robert Sardina allowed the company to withhold plan contributions from employee wages but then failed to ensure that those contributions were forwarded to the plan during 2008.

The department's suit also alleges that Sardina failed to ensure that mandatory employer matching contributions were made to the plan. Finally, the department's lawsuit alleges that Sardina's failures resulted in lost opportunity costs to the plan participants. In all, the suit seeks the restoration of $14,409.19 owed to the plan.

"In effect, these failures by the plan fiduciary allowed the legally prohibited use of plan assets by a party-in-interest, namely the company, which was the plan sponsor," said Jonathan Kay, EBSA's regional director in New York City. "ERISA requires that plan assets be used only to benefit the plan's participants and beneficiaries, and not for any other purpose."

The suit asks the court to order Sardina to restore all losses incurred by the plan plus lost opportunity costs, to permanently prohibit him from serving as a fiduciary or service provider to ERISA-covered plans and to offset benefits due to Sardina against the amount he owes the plan. The department's suit also seeks appointment of an independent fiduciary to distribute any restitution paid by the defendant to the plan's participants and to terminate the plan.

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. Participation in the VFCP requires employers to make workers whole but allows them to avoid EBSA enforcement actions and civil penalties as well as applicable excise taxes. For more information about the VFCP, visit http://www.dol.gov/ebsa.

This case is part of EBSA's employee contribution project to safeguard workers' contributions to 401(k) and health benefit plans. Employers and workers can reach EBSA's New York Regional Office at 212.607.8600 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa.

Solis v. Robert Sardina

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