Compliance December 29, 2010

Lawyer Entitled to 401(k) Distribution

A lawyer accused of financial wrongdoing should receive a 401(k) distribution of his plan savings from his old law firm, but not the employer’s contributions, a federal judge ruled.
Reported by

U.S. District Judge Oliver W. Wanger of the U.S. District Court for the Eastern District of California held that plaintiff Thomas Anderson should get his plan benefits, which totaled over $700,000, less the amount of an outstanding loan. The court said the plan’s anti-alienation clauses controlled the distribution of Anderson’s nonemployer contributions from the plan. However Wagner said Anderson was not entitled to the $50,000 to $100,000 in employer contributions from his account.

Wanger also turned aside Anderson’s claim that the plan administrator violated the Employee Retirement Income Security Act (ERISA) in not paying the distribution of Anderson’s contributions as requested.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

According to the opinion, Anderson’s old law firm accused him of a variety of acts of financial wrongdoing and demanded the rescission of a $150,000 bonus and employer contributions to the 401(k) plan.  Douglas Neibauer, who had served as a plan trustee with Anderson, had denied Anderson’s distribution claims until the financial impropriety accusations were resolved.

The case is Anderson v. Strauss Neibauer & Anderson APC Profit Sharing 401(k) Plan, E.D. Calif., No. 1:09-cv-01446 OWW DLB

Compliance December 29, 2010

Supermarket Stock Drop Case Remains Alive

A federal judge in Pennsylvania has cleared the way for a 401(k) participant to pursue his claim that plan trustees violated their fiduciary duties.
Reported by

U.S. District Judge Berle M. Schiller of the U.S. District Court for the Eastern District of Pennsylvania issued the ruling in plaintiff Gerald Alderfer’s suit alleging wrongdoing under the Employee Retirement Income Security Act (ERISA) in the operation of the Clemons Market Inc. Retirement Savings and Profit Sharing Plan.

Schiller held that Alderfer can move forward with claims the fiduciaries acted imprudently by not liquidating company real estate holdings when market conditions were more favorable as well as by not properly monitoring the impact of the value of those real estate holdings on the value of the plan’s company stock.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Schiller contended that it was premature to decide the issue of whether the trustees prudently managed the plan and its company stock holdings because it was yet to be determined whether the trustees were entitled to the  presumption of prudence frequently granted in similar stock-drop litigation.

The court likewise permitted Alderfer to proceed with his claim that the plan trustees misrepresented to participants the relationship between the company’s real estate assets and the plan’s value. The company, a supermarket chain, eventually sold its assets to a competitor. The suit alleges the value of company stock held by the plan fell from $3 million in 2007 to $1.8 million in 2010.

The case is  Alderfer v. Clemens Markets Inc., et al. E.D. Pa., No. 10-4423.

«