Compliance July 10, 2015

DOL Seeks Independent Fiduciary for Abandoned Plan

The plan’s recordkeeper refused to make distributions after the former plan fiduciary changed each participant’s address to his own.
Reported by

The U.S. Department of Labor (DOL) has filed a lawsuit seeking appointment of an independent fiduciary for the abandoned 401(k) plan of Ants Software Inc. in Dunwoody, Georgia.

According to the DOL, in February 2013, Ants Software Inc. ceased operations, and at the time, Rik Sanchez was fiduciary to the Ants Software Inc. 401(k) Plan. Sanchez informed the plan’s third-party administrator, Aspire Financial Services Inc. that the plan was being terminated and requested that Aspire make account distributions to the plan participants.

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However, in May 2013, Sanchez used his plan administrative login information to access each plan participants’ profile information and changed each participant’s mailing address to be that of Ants and changed the plan’s new bank account to be an account controlled by Sanchez. Due to the changes to the plan participants’ account information, Aspire refused to proceed with distributing plan assets based on Sanchez’s account information changes.

Sanchez then requested Aspire to transfer plan management and the assets of the plan to a company named Renowned Holdings Inc., an entity controlled by Sanchez. Aspire again refused to proceed with distributing plan assets based on the requested transfer request instructions from Sanchez. Sanchez then stopped administering the plan, leaving plan participants unable to receive information about their plan funds and unable to gain access to their plan benefits.

As of August 2013, the plan had approximately 76 participants with assets totaling approximately $1,383,875.53.

The DOL is asking the court to order that the defendants in the case be enjoined from engaging in any further violations of the Employee Retirement Income Security Act (ERISA) and be permanently enjoined from serving as a fiduciary or employee of any employee benefit plan subject to ERISA. The department also seeks the appointment of an independent fiduciary at the defendants’ expense for the purpose of terminating the plan and distributing its assets to plan participants.

The lawsuit was filed in U.S. District Court for the Northern District of Georgia, 1:15-cv-02388-WSD.

Compliance July 10, 2015

Conn. Passes Protection for Transferred Pension Assets

Legislation in Connecticut will protect transferred pension assets from creditor claims.
Reported by

Connecticut Governor Dannel Malloy signed Public Act 15-167 into law, bringing additional protections to retirees’ assets from creditor claims.

Under the text of the law, any annuity contract to which employee defined benefit (DB) plan assets are transferred and lose protections of the Employee Retirement Income Security Act (ERISA) and insurance by the Pension Benefit Guaranty Corporation (PBGC) will be considered a trust protected from claims of creditors.

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In a statement, the advocacy group ProtectSeniors.org said the expanded protections come “at a time when more and more U.S. companies have been offloading their pension obligations to investors, primarily U.S. based insurers.”

The protections in the law are extended to other retirement accounts, including:

  • “any trust, custodial account, annuity or insurance contract established as part of a Keogh plan or a retirement plan established by a corporation which is qualified under Section 401, 403, 404 or 409 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended;”
  • assets contributed to or rolled into “any individual retirement account [IRA] which is qualified under Section 408 of said internal revenue code to the extent funded, including income and appreciation;” and
  • “any medical savings account established under Section 220 of said internal revenue code, to the extent such account is funded by annual deductible contributions or a roll-over from any other medical savings account as provided in Section 220(f)(5) of said internal revenue code.”

The PBGC has expressed concern about the loss of protections for assets involved in a pension risk transfer, and the Pension Rights Center has called for a moratorium on such actions.

Legislation was also introduced in the New York State Senate and Assembly that would provide protections and new disclosures for retirees whose pension assets and accrued benefits are sold or transferred by former employers.

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