Utah Company Faces ERISA Benefits Lawsuit

South Jordan, UTIt's not a lot of money. But it's enough. And when an employer defaults on an ERISA plan—even temporarily—the fallout involves a financial loss to those employees who are stakeholders in the plan. Retirement savings can only be accomplished during an employee's working life. Once retired, it's that much more difficult to make up for lost time.

To that end, the US Department of Labor announced in November that it had launched a lawsuit against Fooptube LLC of South Jordan, Utah, together with its owner, David Rushton. The lawsuit held that the defendants failed to forward delinquent employee contributions to the company's 401(k) profit-sharing employee savings plan.

The allegation suggests a violation of the Employee Retirement Income Security Act, or ERISA.

According to a news release from the US Department of Labor, Fooptube LLC failed to forward $2,532.86 withheld from employee wages between January 15, 2007 and December 15, 2007, later forwarding $132,463.60 in contributions deducted from employee paychecks in an untimely manner.

In addition, the defendants are alleged to have withheld $104,778.05 in employee contributions, only to be retained with the general assets of the company and never forwarded to the plan. The foregoing allegedly occurred between February 15, 2008 and November 15, 2008.

The alleged actions constitute a violation of ERISA pension provisions, whereby administrators of such a plan carry a fiduciary duty to manage the assets of the plan and employee contributions in a manner that represents the best interest of plan stakeholders.

The lawsuit alleges that participant's value in their ERISA investment is off by $7,497.22, a number that represents lost interest due to the failure of plan fiduciaries to make timely contributions.

There's even more to this story. According to the news release, defendants stopped paying third-party administration fees for the plan, effectively discontinuing servicing of the plan as of April 19 of this year. Due to this issue, the plan has been effectively abandoned, leaving participants without access to their retirement funds and ERISA benefits.

The lawsuit is asking for the restoration of all assets with interest, together with the undoing of all unlawful transactions.

"Companies and their executives have an obligation to ensure that plan assets are held in trust to pay future benefits," said Jean Ackerman, director of the department's Employee Benefits Security Administration San Francisco Regional Office, which investigated the case. "This case demonstrates our commitment to take legal action to protect workers' benefits."

The Fooptube employee 401(k) plan showed an asset value of $156,491.74 as of May 7 of this year. There are 94 employees registered with the plan.