Perez v. Wallis et al., involving the USA Baby Inc. 401(k) Plan and U.S.A. Baby Inc. Health Plan in Lombard, Ill.

Date of Action: Jan. 15, 2015

Type of Action: Order

Names of Defendant: Scott Wallis, Ronald Eriksen, U.S.A. Baby Inc., U.S.A. Baby Inc. 401(k) Plan, U.S.A. Baby Inc. Health Plan. Wallis was an owner and president of U.S.A. Baby Inc. and Eriksen was a majority owner and chief executive officer of the defunct company, which was located in Lombard, Illinois.

Allegations: Following an investigation by the Employment Benefits Security Administration, the Department of Labor filed a complaint in 2011 alleging violations of the Employee Retirement Income Security Act by the defendants.

The complaint alleged that the defendants failed to ensure participant contributions and loan repayments were remitted to the U.S.A. Baby Inc. 401(K) Plan. Additionally, Wallis also failed to forward participant health plan contributions to the U.S.A. Baby Inc. Health Plan. Participant contributions intended for these employee benefit plans were wrongly used as operating funds for the company.

Resolution: The court found that Wallis and Eriksen both were fiduciaries to the U.S.A. Baby, Inc. 401(k) Plan who were jointly and severally liable for the losses they caused to the plan. The order requires Wallis and Eriksen to jointly remit $7,749.65 to six participants in the U.S.A. Baby 401(k) Plan in repayment for losses, including lost opportunity cost suffered by the plan due to the prohibited transactions in which they engaged. Wallis must also remit an additional $601.27 to the U.S.A. Baby 401(k) Plan participants.  The court further found that Wallis was a fiduciary to the U.S.A. Baby, Inc. Health Plan and liable for the losses he caused to the plan.  The court ordered Wallis to remit $5,344.11 to eight health plan participants. All payments pursuant to the order are to be made within 10 days.

The order permanently enjoins Wallis and Eriksen from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan in the future and enjoins them from violating the provisions of ERISA.

Court: Northern District of Illinois, Chicago, Ill.

Docket Number: 1:11-cv-3019

Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans.  Additional information can be found at www.dol.gov/ebsa.

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