Compliance August 7, 2018

Court Orders Business Owner to Prison for Embezzling 401(k) Funds

The court-ordered restitution includes $69,000 in employee and matching employer contributions, as well as lost earnings due to the 401(k) plan, and approximately $4.3 million for fraudulent loans and identity theft.

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The U.S. District Court for the District of Kansas has sentenced business owner Brenda Wood to serve 50 months of imprisonment followed by an additional five years of supervised release, and to make more than $4.3 million in restitution for bank fraud and violations of the Employee Retirement Income Security Act (ERISA).

Wood previously pleaded guilty to two counts of bank fraud and one count of theft from an employee benefit plan.

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Wood owned Professional Cleaning and Innovative Building Services Inc. (PCI), a commercial cleaning services company in Kansas City, Missouri, as well as four Bonner Springs, Kansas, businesses: Commercial Development and Management LLC (CDM), Action Real Estate Services LLC, G&W Investments LLC, and Riverview Crossings LLC. In November 2010, she established the PCI Building Services Inc. 401(k) plan for the retirement benefit of employees of PCI and CDM.

A multi-agency investigation found that from approximately May 2011 through August 2012, Wood unlawfully embezzled and converted approximately $31,403 in deferred contributions from employee salaries. The court-ordered restitution includes $69,000 in employee and matching employer contributions, as well as lost earnings due to the 401(k) plan, and approximately $4.3 million for fraudulent loans and identity theft.

Wood assured employees who confronted her about missing 401(k) contributions that Nationwide Life Insurance Company held their funds in escrow when, in fact, she had already used their contributions for her own benefit without their permission, the Department of Labor (DOL) says. Wood also falsely accused her company’s accountant of embezzlement, and falsely claimed her former in-house counsel and human resources manager were responsible for the 401(k) plan. In addition, she made false statements to Farmers Bank and Trust of Great Bend, falsely claiming PCI had received a contract for cleaning services at an Internal Revenue Service (IRS) facility in Kansas City, Missouri, when the company failed to make the final round of bids. Based on her statements, the bank extended a $350,000 line of credit on which Wood submitted draw requests, stating that she needed the funds to fulfill the IRS contract.

“Fraudulent transactions like these have a severe impact on companies and individuals,” says DOL Employee Benefits Security Administration (EBSA) Regional Director Jim Purcell. “The actions can cause irreparable damage to the retirement savings of individuals and their future financial security.”
Client Service August 7, 2018

Financial Wellness Offerings a Value-Added Service for DC Plan Clients

Adding education about managing debt to advisers’ offerings will increase their competitiveness as well as the effectiveness of clients’ DC plans, LIMRA SRI says.

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Nearly three-quarters (73%) of advisers report that they specifically offer financial wellness support to defined contribution (DC) plan clients, according to LIMRA Secure Retirement Institute (LIMRA SRI).

 

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“Financial wellness programs offer the adviser an opportunity to use creative ways to provide value-added services and programs to their plan sponsor clients,” LIMRA SRI says.

 

The study finds almost all DC advisers who provide financial wellness services offer retirement savings services and investing support (96% and 95%, respectively). Other financial wellness offerings include:

  • Rainy day/emergency funds (71%),
  • Budgeting and managing spending (66%),
  • College savings (66%),
  • Short-term saving to support planned expenses (59%), and
  • Managing debt including college loans and credit cards (58%).

 

LIMRA SRI says while most advisers support financial wellness services, managing debt is one of the least likely features to be included in the wellness programs, but as previous LIMRA SRI research has found, it has one of the strongest ties to one’s retirement savings. Adding this benefit to advisers’ offerings will increase their competitiveness as well as the effectiveness of clients’ DC plans.

 

The study finds advisers who include wellness offerings are also more likely to include other key participant services such as advice to plan participants, retirement income advice, advice to departing participants and custom allocation models.

 

The research shows most adviser groups are not inclined to increase the services they offer, and 15% of those who don’t currently offer financial wellness said they plan to do so in the next two years. In general, for those groups not looking to increase the number of services they offer, the best way to add value to their current offerings would be to enhance the services they already offer in their portfolio, LIMRA SRI says.

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