Labor Department Seeks Appointment of Independent Fiduciary for Orphaned San Diego Profit Sharing Plan

Archived News Release — Caution: Information may be out of date.

San Francisco, California - The U.S. Department of Labor filed a complaint against the defunct Hafer Steel Company of San Diego, California, and the trustee of the Hafer Steel Company Profit Sharing Plan for alleged violations of the Employee Retirement Income Security Act (ERISA). The department is seeking to obtain a court-appointed independent fiduciary to manage, terminate, and distribute the assets of the company’s orphaned profit sharing plan to participants and beneficiaries.

Filed November18, 2002, in the U.S. District Court for the Southern District of California, the suit results from an investigation by the Los Angeles Regional Office of the department’s Pension and Welfare Benefits Administration (PWBA). Besides Hafer Steel Company, the complaint names as a defendant Kenneth Bernard who served as trustee of the plan.

According to Billy Beaver, Los Angeles regional director of PWBA, the alleged violations of ERISA occurred as a result of Hafer Steel Company and Bernard failing to perform the functions required of them to administer and manage the plan. Hafer Steel Company and Bernard failed to take action to terminate the plan and distribute the benefits to the participants; failed to file required annual reports; failed to respond to participant requests for information; and failed to appoint a successor fiduciary to manage, operate and terminate the plan. As of January 9, 2002, the plan had 11 participants and assets of $408,806, with additional assets of $22,082 consisting of loans made to participants. Without direction from a plan fiduciary with discretionary authority, the custodial trustee is unable to comply with participant requests for distributions of benefits to which they are entitled to under ERISA.

The plan is a profit sharing plan that provides for employer contributions to support benefits for eligible employees of Hafer Steel Company.

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

(Chao v. Hafer Steel Company, Kenneth Bernard, Hafer Steel Co. Profit Sharing Plan
Civil Action No. 02 CV 2264J (AJB))

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