Employers are entrusted to safeguard their employees’ pension funds or face steep consequences, as one home health provider recently learned.
A federal court ruled that Flossmoor, IL-based Home Bound Healthcare, its president / owner and secretary-treasurer, must restore $85,402, including lost opportunity costs, to the company’s 401(k) plan.
“Courts have described the fiduciary duties owed to plan participants as the ‘the highest known to the law.’ The failure to deposit employee 401(k) contributions is a serious breach of these duties,” Fisher-Phillips attorney Ron Pierce told the McKnight’s Business Daily. “Plan fiduciaries must restore the participant contributions plus earnings and may be subject to penalties.”
The filing against Home Bound Healthcare, on behalf of the secretary of labor, follows an investigation by the department’s Employee Benefits Security Administration that found that the company’s officers did not remit $59,921 in employee voluntary salary deferral contributions and loan repayments to the pension funds for certain payroll periods between April 1, 2016, through Aug. 16, 2019. The investigation also found that the 401(k) plan experienced an additional $25,481 in lost opportunity costs, calculated through Aug. 3, 2022.
In addition to restitution and damages, the parties also must provide written allocation instructions to the plan custodian to reimburse eligible employees for the losses. The parties are to be removed as fiduciaries, service providers, trustees and administrators of the 401(k) plan. Additionally, they are permanently enjoined from violating the Employee Retirement Income Security Act and from serving as fiduciaries or service providers to any ERISA-covered employee benefit plan in the future.
“Employers should develop internal procedures to regularly review payroll practices and ensure compliance with 401(k) deposit deadlines,” Pierce said. “In addition, a best practice is to establish a committee charged with the responsibility for reviewing plan investment alternatives, selecting plan administrators, and monitoring investment performance, fees and expenses.”
