Labor Department Settles Pension Plan Lawsuit Against Bankrupt Owner of Michigan Company

Archived News Release — Caution: Information may be out of date.

Cincinnati, Ohio - The owner of a now-defunct Wayne County, Michigan company must pay more than $7,700 into the company’s “orphaned” 401(k) plan to make up for money that he should have deposited into his workers’ accounts in 1999. Clifford A. Thomas, who owned C.A. Thomas, Inc., was ordered to make the payments under a consent judgment obtained March 14, 2003 by the U.S. Department of Labor in federal district court in Detroit.
The judgment also appoints Midwest Pension Actuaries of Farmington Hills, Michigan to oversee the plan and terminate it after Thomas repays a total of $7,787 in principal and interest.

Plans generally become "orphan plans" when they are abandoned by all plan fiduciaries designated to manage and operate the plans and their assets. Without a plan fiduciary, participants and beneficiaries are unable to receive pension distributions or to make inquiries about their benefits.

Thomas, who was barred permanently from serving in any fiduciary position to any plan subject to the Employee Retirement Income Security Act (ERISA), failed to segregate employees’ 401(k) plan withholdings and loan repayments from the company’s general operating fund during the period of September 1999 through October 1999. To repay the plan’s other participants, Thomas agreed to waive his rights to his individual account balance and, as a beneficiary, to his wife’s account balance.

C.A. Thomas Inc. ceased doing business October 18, 1999, but has not filed for bankruptcy. Clifford Thomas filed personal bankruptcy under Chapter 7 on April 15, 2002. The company pension plan had 70 participants and assets totaling $484,344 as of December 31, 1999.

“This action underscores the Department of Labor’s commitment to protect and preserve the benefits promised to employees by their employers,” said Joseph Menez, director of the department’s Cincinnati Regional Office of the Employee Benefits Security Administration (EBSA), which investigated the case.

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). Employers must make workers whole, but they may avoid EBSA enforcement actions and civil penalties, as well as any applicable excise taxes. For more information about the VFCP see www.dol.gov/ebsa.

Employers and workers who have questions or concerns regarding their private-sector pension and health plans can contact the EBSA regional office for help at 859.578.4680 or EBSA’s toll free number, 1.866.444.EBSA (3272).

(Chao v. Clifford A. Thomas)
Civil Action No. 03-CV-70600

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