Labor Department Settles Lawsuit With Tennessee Plan Over Erisa Violations

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor negotiated a settlement August 21 with the Continental Vinyl Window Co., Inc. (CVW) of LaVergne, Tennessee and a trustee of its 401(k) profit sharing plan for failing to forward employee contributions and for making improper loans and transfers from the 401(k) plan.

Under the settlement terms, trustee and company president Dale P. Schneider was permanently barred from serving or acting as a fiduciary to any employee benefit plan subject to the Employee Retirement Income Security Act (ERISA). He also agreed to:

• Offset his own plan benefits against $10,040.65, representing lost earnings to the plan, and to redistribute the funds to plan participants on a prorated basis
• To resolve both his outstanding participant loan of $42,500 and his prior distribution from the plan of $102,600 as well as previous distributions from the plan, respectively, of $67,400 and $72,000, to company officials Jeffrey Schneider and Leroy Gillmer by filing required IRS Form 1099s for these distributions.

Also, the company agreed to repay the plan $15,754.41, representing un-remitted employee contributions to the plan, and to take steps necessary to terminate the plan and distribute its assets to participants and beneficiaries. CVW, which manufactures vinyl replacement windows and room enclosures, established the 401(k) plan in January 1989, permitting employees to defer up to 15 percent of their compensation before taxes to the plan. As of December 31, 1996, the plan had 66 participants and $485,994 in assets. The company filed for bankruptcy reorganization on November 16, 1999.

The department’s lawsuit, filed August 15, alleged that the corporation, doing business as Continental Vinyl Products, Co., Inc. and Schneider violated ERISA by:

• Approving a $42,500 personal loan from the 401(k) plan to himself and not making an installment payment on the loan since August 1996
• Causing the plan to pay $4,938.77 in surrender charges on distributions from the 401(k) plan
• Transferring $242,000 of 401(k) assets to the account of CVW to pay the daily operational expenses of the corporation.

The department’s settlement, entered August 21 in the federal district court in Nashville, Tennessee, resulted from an investigation by the Atlanta Regional Office of the Pension and Welfare Benefits Administration into violations of ERISA.

“Our goal is to ensure that consumers know the department is only a phone call away to protect benefits promised by employers,” said Howard Marsh, director of the Atlanta office. “Employers and workers can reach us at 404.562.2156 for help with any problems relating to private-sector pension, health and other benefit plans.”

(Chao v. Continental Vinyl Window Co., Inc.
Civil Action No. 3:01-1216)

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