Northbrook, Ill., United Employee Benefit Fund trustees agree to correct improper plan loans totaling more than $1.7 million

CHICAGO – To resolve a lawsuit filed by the U.S. Department of Labor, a federal judge in Chicago has signed a consent order between the United Employee Benefit Fund in Northbrook and the secretary of labor to amend the United Employee Benefit Fund’s governing documents so that they comply with requirements of the Employee Retirement Income Security Act and the Internal Revenue Code. An investigation by the department’s Employee Benefits Security Administration found that the fund’s trustees made loans to participants that were improper, unsecured and allowed to become delinquent. Pursuant to the consent order, the amount of the improper loans – totaling more than $1.7 million – will be subject to corrected loan documentation, repaid by plan participants or treated as taxable distributions.

“Plan fiduciaries have a special obligation to maintain the integrity of the plan for the purpose of ensuring future retirement income. Allowing participants to withdraw plan assets without regard to ERISA’s safeguards violates that basic principle,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “Our legal action underscores the Labor Department’s commitment to hold accountable those who are entrusted with the assets of employee benefit plans.”

David Fensler and Anthony Monaco, as trustees to the fund, allegedly approved at least 194 improper loans from the fund to individual participants between January 1997 and Dec. 31, 2009. As of that date, none of the loans approved by the trustees had been paid back to the fund in full, and only six of the participants had ever made any payments on loans issued to them. Fensler and Monaco allegedly made no effort to enforce the terms of the loan documents or collect payments, in violation of the plan’s governing documents and ERISA.

Under the terms of the consent order, the fund’s trustees will correct all prohibited transactions in which they engaged since August 2008 and will ensure that all loans meet all the requirements of ERISA and the IRC going forward. Specifically, the plan’s governing documents will be amended to include requirements that a participant must demonstrate and document an emergency need before he or she can receive a loan from the fund. In addition, the fund will issue an Internal Revenue Service Form 1099 at the end of the plan year for the full unpaid loan, in the event a loan is delinquent for more than 120 days. For all loans issued after Aug. 30, 2008, the fund will issue a notification to the participant within 45 days that the individual will receive a Form 1099 for plan year 2012 for the outstanding loan balance plus any outstanding interest in accordance with IRC rules.

The United Employee Benefit Fund was established by the Professional Workers Master Contract Group and the National Production Workers Union Local 707 to provide welfare, medical, death, disability and child care facility benefits to the fund’s participants. As of Dec. 31, 2009, the fund had approximately 281 participants.

The suit resulted from an investigation by EBSA’s Chicago Regional Office and was litigated by the department’s Regional Office of the Solicitor in Chicago. For help with problems related to private sector retirement and health plans, employers and workers can reach EBSA’s Chicago office at 312-353-0900 or toll-free at 866-444-3272. Additional information can be found at www.dol.gov/ebsa.

Solis v. David Fensler, Anthony Monaco and United Employee Benefit Fund
Civil Action Number:  1:11-cv-06031

U.S. Department of Labor news materials are accessible at www.dol.gov. The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.