Iowa Automobile Dealers Ordered To Pay Trust Fund $291,667 As Result Of Labor Department Lawsuit

Archived News Release — Caution: Information may be out of date.

Kansas City, Missouri - The U.S. Department of Labor obtained a judgment on August 16 requiring the West Des Moines-based IADA Services, Inc. to repay $291,667 it received in excessive fees as an investment advisor to the Iowa Auto Dealers' Association's insurance trust. IADA Services is a service provider and investment advisor to the insurance trust.

The judgment resolves a lawsuit alleging a series of violations of the Employee Retirement Income Security Act (ERISA), in which IADA Services received excessive compensation from its relationship with the insurance trust. The lawsuit alleged that from June 30, 1992 through June 30, 1994:

The trust paid IADA Services 35 cents per participant per month for administering COBRA, exceeding the direct expense for this service

The trust paid IADA Services a monthly fee of $1,200 for administering the trust, exceeding the direct expenses incurred by IADA Services for this service

The trust paid IADA Services a fee of 2 percent of gross insurance premiums billed to members of the trust for providing legal advice, investment counseling, COBRA notices, premium billing and collection services, issuing participants benefit summaries and enrolling new participants. The 2 percent fee exceeded the direct expenses incurred by IADA Services for the services provided.

In addition, the lawsuit alleged that from June 30, 1992 until June 30, 1996, the trust paid IADA Services an annual investment management fee amounting to 0.375 percent of the trust's total assets even though neither IADA Services nor the IADA Services controller were registered investment managers as defined by the Employee Retirement Income Security Act (ERISA) and required by the Investment Advisers Act of 1940.

The trust, established in 1948, is a voluntary employee benefits association (VEBA) providing medical, disability and death benefits to Iowa Automobile Dealers Association members and the members' employees. As of June 30, 1996, there were 5,217 participants in the trust and assets of $7,763,202.

"This action reaffirms our commitment to protect the hard-earned benefits promised by employers", said Gregory P. Egan, director of the Kansas City Regional Office of the Pension and Welfare Benefits Administration, which conducted the investigation. The consent order/judgment was entered in the federal district court in Des Moines, Iowa. The lawsuit was filed on August 16. Employers and workers may call the PWBA's Kansas City office for help with any problems relating to private-sector pension and health plans at 816.426.5131.

(Chao v. IADA Services, Inc.
Civil Action No. 4:01-CV-9049)

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