Maryland Firm Is Sued By Labor Department To Recover 401(K) Plan Assets

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor sued GNM Associates, Inc., an engineering firm located in Silver Spring, Md., in order to recover 401(k) plan assets from its estate following a bankruptcy proceeding.

GNM was the sponsor of a 401(k) profit sharing plan and trust that allowed its employees to defer a portion of their compensation and have it deposited on their behalf. The lawsuit alleged from Jan. 1, 1997, to June 24, 1999, GNM withheld $62,607 from its employees’ paychecks, but failed to forward the money to the plan. The money remained commingled with GNM’s general assets. GNM filed for bankruptcy on June 24.

The firm’s action violated provisions of the Employee Retirement Income Security Act (ERISA), which prohibit plan fiduciaries and sponsors from failing to act solely in the interest of plan participants. The commingling of plan funds with the general corporate assets also violated self-dealing provisions of the law that prohibit the use of plan assets by parties-in-interest for their personal benefit.

The lawsuit seeks to have GNM return the assets, plus interest, to the plan. In a related action, Herman v. Bateman, the department filed a lawsuit against a trustee of the GNM plan to prevent debt that she owed from being discharged in a bankruptcy proceeding.

The actions resulted from an investigation by the Washington District Office of the Pension and Welfare Benefits Administration into violations of ERISA.

The GNM lawsuit was filed on June 26 in the United States Bankruptcy Court in Greenbelt, Md.

Herman v. GNM
Case No. 99-17666

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Archived News Release — Caution: Information may be out of date.