U.S. Labor Department sues officers of Jackson, Mich., business to restore delinquent contributions to company’s SIMPLE IRA plan

Archived News Release — Caution: Information may be out of date.

Jackson, Michigan - The U.S. Department of Labor has sued business executives and trustees of Spectrum Tool and Design Inc.’s savings incentive match plan for employees individual retirement account (SIMPLE IRA) in Jackson for failing to forward employee contributions to workers’ accounts and to segregate those contributions from the general operating assets of the company.

“The department will act when plan fiduciaries fail to carry out their duty to protect the retirement contributions made by covered workers,” said Joseph Menez, director of the Cincinnati Regional Office of the department’s Employee Benefits Security Administration (EBSA).

The lawsuit alleges that company president Jon R. Hartman and company vice-president Dan C. Ott, both fiduciaries to the IRA plan, were late to remit or failed to remit employee contributions in violation of the Employee Retirement Income Security Act (ERISA). The funds were deducted from workers’ paychecks during periods in 2003 and 2004 but remained co-mingled with company funds. The defendants also allegedly failed to obtain a fidelity bond as required by ERISA.

The suit seeks to require restoration to the plan of all contributions plus interest, remove the defendants as plan fiduciaries and correct any prohibited transactions. The company ceased operations in 2005, and in 2006 both Hartman and Ott filed for personal bankruptcy. The Labor Department has filed stipulations in bankruptcy court to which they have agreed not to discharge debts owed to the IRA plan.

Employers with similar problems who are not yet the subject of an EBSA investigation may be eligible to participate in the department’s Voluntary Fiduciary Correction Program (VFCP). Participation requires employers to make workers whole but allows them to avoid EBSA enforcement actions and civil penalties as well as any applicable excise taxes. For more information, see www.dol.gov/ebsa.

This suit resulted from an investigation conducted by Detroit district staff within EBSA’s Cincinnati region. Employers and workers can reach the Cincinnati office at 859.578.4680 or toll-free at 1.866.444.EBSA (3272) for help with problems relating to private sector retirement and health plans. In fiscal year 2006, EBSA achieved monetary results of $1.4 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Hartman
Civil Action Number 4:07cv11772

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