Labor Department Sues Virginia Pension Officials for Abandoning 401(k) Plan

Archived News Release — Caution: Information may be out of date.

Springfield, Virginia - The U.S. Department of Labor sued the 401(k) administrator and trustee of Springfield, Virginia-based Infotex, Ltd. on June 8, 2001, for failure to appoint successor fiduciaries to manage the plan and distribute its assets to plan participants.

Plans become orphan plans when they are abandoned by all plan fiduciaries designated to manage and operate the plans and their assets. As a result, participants and beneficiaries are unable to receive pension distributions and to make inquiries about their benefits.

Infotex provided computer security to its clients before ceasing operations in March 1998. The company created the plan in 1997 to provide retirement benefits to eligible participants employed by Infotex, Sistex, DSK Systems and OCS. According to plan records, there were two participants covered by the plan and assets of $102,432.63.

The department alleges that Infotex and Russell Varnado violated their duties under the Employee Retirement Income Security Act (ERISA) as the plan administrator and trustee of the plan, respectively. According to the lawsuit, Infotex and Varnado failed to manage the plan or to appoint successor plan officials after the company ceased operations. The plan allegedly ceased operations when the company went out of business. As a result, participants were unable to get distributions from their pension accounts.

The defendants also allegedly failed to file annual reports as required by ERISA for plan years 1997 to 1999.
The lawsuit seeks a court order to remove the defendants from their positions with the plan, appoint an independent fiduciary to administer the plan, distribute the plan’s assets to participants and beneficiaries, and. terminate the plan. In addition, it would require that Metropolitan Life Insurance Co. -- the custodian of the plan’s assets -- turn over all assets to the independent fiduciary appointed by the court.

“This action reaffirms our commitment to protect the hard-earned benefits promised by employers,” said Mabel Capolongo, Director of PWBA’s Philadelphia Regional Office. “Employers and workers can reach us at 215.861.5300 for help with any problems relating to private-sector pension and health plans.”

(Chao v. Varnado
Civil Action No. 01-899-A)

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