Labor Department Sues Trustee Of Illinois Profit Sharing Plan For Failure to Forward Employee Contributions

Archived News Release — Caution: Information may be out of date.

Chicago, Illinois - The U.S. Department of Labor filed two lawsuits against the trustee of the profit sharing plan of Birger Nyborg and Co., Ltd. of Roselle, Illinois for failing to forward contributions withheld from employees’ paychecks and to prohibit the trustee from discharging debts owed to the plan in personal bankruptcy proceedings.

The department filed civil and bankruptcy lawsuits in Chicago on September 16, 2002, alleging that Nyborg commingled employee contributions owed to the plan with the company’s general assets and used the plan’s assets to pay the operating expenses of the company from July 1994 to December 1997.

The civil suit asks the court to require Nyborg to restore all losses with interest, to replace him with an independent fiduciary to administer the plan and to permanently bar Nyborg from serving in a trust position to any plan governed by the Employee Retirement Income Security Act (ERISA). In the suit filed with the bankruptcy court, the department is seeking to prevent Nyborg from discharging debts owed the plan as a result of his own personal Chapter 11 bankruptcy. The investigation was conducted by the department’s Chicago Regional Office of the Pension and Welfare Benefits Administration (EBSA).

The Birger Nyborg profit sharing plan was established in 1986 to provide benefits to the company’s employees upon retirement, death or disability. The plan had $305,385.08 in assets and 4 participants as of December 31, 2001.

Kenneth Bazar, director of EBSA’s Chicago Office, noted that 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 (VFCP). Participation in the VFCP requires employers to make workers whole but allows them to avoid EBSA enforcement actions and civil penalties as well as any applicable excise taxes. "The VFCP gives plan sponsors a way to come into compliance with ERISA by restoring workers' benefits while avoiding an investigation by EBSA,” said Bazar. “It protects workers' health and retirement benefits and allows us to focus our resources on those who seek to avoid compliance." For more information about the VFCP, see www.dol.gov/ebsa.

Employers and workers can contact the Chicago Regional Office at 1.312.353.0900 or EBSA’s Toll-Free Employee & Employer Hotline number, 1.866.275.7922, for help with any problems relating to private-sector pension and health plans.

(Chao v. Birger Nyborg & Co., Ltd. and Chao v. Birger Nyborg
Civil Action No. CV-02C-6567 Adversary # 02A01302)

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