Former Massachusetts employer agrees to restore employee contributions to company 401(k) plan to resolve U.S. Labor Department lawsuit

Boston – The U.S. Department of Labor has obtained a consent judgment requiring the plan administrator and trustee to restore nearly $23,000 owed to the 401(k) plan of defunct Davis Design Associates Inc. of Fitchburg, Massachusetts.

The department sued the company and its president, Paul Stewart Smith – the 401(k) plan trustee – for allegedly violating the Employee Retirement Income Security Act (ERISA).

The lawsuit filed in the U.S. District Court for the District of Massachusetts alleged that, starting January 1, 2005, the defendants failed to forward to the plan $1,661.38 in employee contributions and to take steps to collect contributions owed to the plan. In addition, the suit alleged that they failed to properly allocate $21,154.87 of plan assets to the appropriate plan participant and to ensure that the plan was properly administered.

“Those failures benefited the company at the expense of its employees and are direct violations of the fiduciary duties imposed on plan sponsors and administrators by ERISA,” said Jean Ackerman, regional director of the Labor Department’s Employee Benefits Security Administration (EBSA) in Boston. “The law requires that plan funds be held in trust for the participants and used only for the benefit of those participants and their beneficiaries.”

This judgment requires restitution to the plan and proper allocation of $22,816, plus interest, to the accounts of six plan participants. The judgment also orders defendant Smith to distribute the plan’s assets to participants and to terminate the plan, and permanently bars him from serving in a fiduciary capacity to any ERISA-covered plan in the future.

This case was investigated by EBSA’s Boston Regional Office. Employers and workers seeking help with problems relating to private sector pension and health plans may reach the Boston office at 617.565.9600 or the agency toll-free at 866.444.3272. In fiscal year 2008, EBSA achieved monetary results of $1.2 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Additional information can be found at www.dol.gov/ebsa.

Solis v. Davis Design Associates Inc. and Paul Stewart Smith
Civil Action Number 1: 09-CV-10872

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