Judge orders trustees to restore losses to Mid-States Express Inc. 401(k) Plan; fiduciary ordered to restore losses to the Employee Benefit Plan in Aurora, Ill.

Date of Action: Jan. 29, 2014

Type of Action: Order

Names of Defendant: Bruce E. Hartmann, Terry Hartmann, Mid States Express 401(k) Plan and Mid-States Express Inc. Employee Benefit Plan

Allegations: The U.S. Department of Labor filed a lawsuit on Jan. 8, 2010, in the U.S. District Court for the Northern District of Illinois to recover $75,416.72, in unremitted employee contributions and participant loan repayments and associated lost opportunity costs to the Mid-States Express, Inc. 401(k) Plan as well as employee contributions and unpaid health plan claims of the Mid-States Express Inc. Employee Benefit Plan, a health plan, totaling $3,983,980.

Mid-States Express Inc. was located in Aurora, Ill. The company filed for Chapter 11 bankruptcy protection on March 27, 2009, which was converted to a Chapter 7 bankruptcy on May 6, 2009. Bruce Hartmann filed for Chapter 7 bankruptcy protection on Nov. 18, 2011.

The department’s suit alleged that Bruce Hartmann, the company’s chief financial officer and a trustee of the 401(k) Plan violated the Employee Retirement Income Security Act by failing to remit the employee contributions and loan repayments to the 401(k) Plan. Moreover, the department alleged that Bruce Hartmann also failed to forward employee contributions and fund claims of the health plan. Terry Hartmann, former chairman of the board and a trustee of the 401(k) Plan violated ERISA by failing to ensure employee contributions and loan repayments were remitted to the401(k) Plan’s trust account.

Resolution: Judge James B. Zagel, of the U.S. District Court for the Northern District of Illinois, Eastern Division has entered an order that both Bruce Hartmann and Terry Hartmann are liable for the total debt of $75,416.72 in unremitted employee contributions, participant loan repayments and associated lost opportunity costs to the 401(k) Plan. Within 10 days of the order, Terry Hartmann is ordered to pay $75,416.72 to the plan. The aforementioned losses will be offset by any sums actually deposited in the 401(k) Plan account by defendant Bruce Hartmann. On Dec. 9, 2013, Bruce Hartmann restored $20,000 to the Mid-States Express 401(k) Plan and has agreed to restore $30,000 in five annual payments beginning Aug. 1, 2014.

Bruce Hartmann is also liable for employee contributions and unpaid health plan claims to the health plan totaling $3,983,980. The judge ruled the debts owed to both the 401(k) Plan and health plan are not dischargeable under Bruce Hartmann’s Chapter 7 Bankruptcy Petition. Both Terry Hartmann and Bruce Hartmann are permanently enjoined from acting as a fiduciary to any ERISA covered plan in the future.

Court: United States District Court, Northern District of Illinois, Eastern Division

Docket Numbers: 1:10-cv-00123 | 1:12-cv-05503

U.S. Department of Labor 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.