U.S. Department of Labor sues Knoxville College and former college president for breach of fiduciary responsibilities

Archived News Release — Caution: Information may be out of date.

Atlanta – The U.S. Department of Labor has sued Knoxville College and its former president, Dr. Barbara Hatton, to recover employee contributions of $14,725 which were allegedly diverted from the participants’ individual retirement savings plans in violation of the federal Employee Retirement Income Security Act (ERISA).

“These employees counted on this money being deposited into their individual retirement accounts, and the Labor Department will not allow fiduciaries to break that trust by diverting the money for other uses,” said Rebecca Marshall, director of the Atlanta Regional Office of the department’s Employee Benefits Security Administration (EBSA).

Faculty and staff at the college were permitted to contribute a portion of their pay to their individual retirement plans, and the plan required the college to make matching contributions on behalf of the participants.

The lawsuit, filed in the U.S. District Court for the Eastern District of Tennessee, alleges that Knoxville College and Hatton failed to segregate participants’ contributions, did not forward them to the TIAA-CREF retirement plan administrator and failed to maintain an adequate fidelity bond.

The suit asks the court to require that the defendants restore all losses to the plans, appoint a successor fiduciary or administrator to receive any funds recovered and distribute them to plan participants, and bar the defendants from acting in a fiduciary capacity to any employee benefit plan subject to ERISA.

Employers with similar problems who are not yet subjects of EBSA investigations may be eligible to participate in the department’s Voluntary Fiduciary Correction Program. 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.

Employers and workers can reach EBSA’s Atlanta Regional Office at 404.302.3900 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Knoxville College

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Archived News Release — Caution: Information may be out of date.