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Illegal Deductions in Violation of ERISA

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Chicago, ILThe US Department of Labor has sued the owners of Mid-States Express, a bankrupt trucking company, for illegally deducting money from employee paychecks for medical coverage without actually paying its employees' medical bills. Bruce Hartmann, an officer and owner of the company, did not tell his employees that they were not receiving any health coverage.

The lawsuit further alleges that Bruce Hartmann and his father, Terry Hartmann, failed to remit in a timely manner over $1.5 million in 401(k) plan participant contributions and loan repayments, as well as $65,000 in contributions and loan repayments—funds which they instead for internal operations.

"As a result, despite the fact that $1.26 million in employee health plan contributions were withheld, $3 million in employee medical claims were not paid, in violation of the Employee Retirement Income Security Act (ERISA)," stated the Labor Department.

The lawsuit seeks to recover all losses, with interest, incurred by the employees who thought they were covered. It also seeks to permanently bar the trucking company's owners from entering into any health plan governed by ERISA.

"These defendants blatantly misused their employees' retirement and health benefit contributions for personal gain," said Phyllis C. Borzi, assistant secretary of the Labor Department's Employee Benefits Security Administration (EBSA). "Despite financial hardships, employers and plan officials are obligated to forward those employee contributions to the plans."

A relative of the Hartmanns said that the bad economy, failing banks and increased pension payments hit the company hard. He also said the company was deluged with numerous health insurance claims at once, but was working to pay them.

Mid-States Express went bankrupt in March 2009. Approximately 650 employees were covered by the company's 401(k) plan.

Meanwhile, a different lawsuit filed by the US Department of Labor alleges that Raymond Woronowicz, former president of the Business Alliance Inc., failed to put employee contributions into the company's employee benefit plan. According to the lawsuit, elective contributions from employee participants were deducted from paychecks between September 2004 and January 2006 but were not deposited into the plan.

The lawsuit seeks to remove the defendant as a fiduciary and further seeks approximately $26,000 in plan assets.


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