Brokerage Must Repay Plan Participants, Beneficiaries

The U.S. Department of Labor (DOL) recently obtained a consent judgment ordering Plymouth Meeting, Pennsylvania-based Dietrich & Associates Inc. and its CEO and sole shareholder, Kurt E. Dietrich to return $272,722 to plan participants and beneficiaries. The DOL alleged that Dietrich and his firm obtained the compensation inappropriately when providing services to an Employee Retirement Income Security Act (ERISA)-covered retirement plan sponsored by Memorial Hospital-West Volusia Inc. in Deland, Florida.

The judgment resolves a lawsuit filed by the DOL (Perez v. Dietrich & Associates Inc. et al, Civil Action Number 2:12-cv-04910) following an investigation by the Employee Benefits Security Administration (EBSA), which found ERISA violations.

The DOL filed the lawsuit in September 2012 in the U.S. District Court for the Eastern District of Pennsylvania, alleging the defendants violated ERISA when the retirement plan contracted Dietrich & Associates to act as its fiduciary and obtain bids from insurance companies for a termination annuity for a fee of $50,000. It also alleged that the company failed to disclose to plan fiduciaries a pre-existing arrangement with Hartford Life Insurance Co., the insurance company that won the bid, which entitled Dietrich & Associates to receive additional undisclosed compensation. The case was litigated by the department’s Office of the Solicitor in Washington, D.C.

“The department was prepared to prove that the defendants took advantage of their position with the plan to earn undisclosed payments from the plan’s insurance company,” said Marc Machiz, EBSA’s regional director in Philadelphia. “We are pleased with the consensual resolution of the litigation, which sends a clear message that plan fiduciaries will be held accountable when they don’t act in the best interest of the plan and its participants.”

In addition to repaying the $272,722, plus a $27,273 penalty, the judgment requires the defendants to enter into written agreements, which disclose all information required by the law with any ERISA plans they service in the future. The judgment also requires the defendants to ensure that any entities they control in the future comply with the requirements of the consent order.