Tuesday, January 13, 2009
Blog Suspended...
Monday, November 24, 2008
Weekend DOL Blotter - 11/23/2008
"Owner of defunct North Carolina sign company pleads guilty to embezzlement of 401(k) and health plan assets."
The next action was a lawsuit filed by the DOL against a health plan provider in North Carolina: "U.S. Department of Labor sues North Carolina health provider to restore funds to employees’ pension plan".Atlanta — The owner of defunct Wesco Signs Inc., Concord, North Carolina, pleaded guilty in the U.S. District Court for the Middle District of North Carolina in Greensboro to two counts of embezzlement of assets from the company’s 401(k) and health plans.
The plea agreement was prosecuted by the U.S. Attorney’s Office for the Middle District of North Carolina and was investigated by the Atlanta Regional Office of the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA).
Mitchell W. Messer was indicted by a federal grand jury August 26 on two counts of embezzling assets from employee benefit plans governed by the Employee Retirement Income Security Act. The indictment charged Messer with embezzlement of $19,286.21 in 401(k) assets and $5,583.38 in health care premiums.
During the period from February 4 through June 17, 2005, he failed to forward retirement plan contributions deducted from employees’ paychecks. Messer also did not forward health care premiums withheld from employee wages during the period of July 11 to November 4, 2005.
At the time of the criminal violations, Messer was the majority owner and president of Wesco Signs. The company, which manufactured electric and on-premise signs, sponsored a 401(k) for 46 participants as well as a health benefit plan.
As part of his plea agreement, Messer will make restitution to the plans and agreed to pay a special assessment of $100 for each offense. He is scheduled to be sentenced February 5, 2009.
“Theft of employee benefit assets jeopardizes the benefits of workers. This case sends a clear message that theft of employee benefit plan assets is a serious crime that will be prosecuted to the full extent of the law,” said R.C. Marshall, director of EBSA’s Atlanta Regional Office.
U.S. v. Messer
Criminal Number 1:08CR324-1
Atlanta – The U.S. Department of Labor has sued current and former fiduciaries of the money purchase pension plan of Vance-Warren Comprehensive Health Plan Inc. of Manson, North Carolina, to restore more than $120,000 in employer contributions and interest owed to the company’s pension plan.
The Labor Department’s lawsuit, filed in the U.S. District Court for the Middle District of North Carolina, alleges that Vance-Warren, Hazel Silver-Boyd, Charles Worth, Charles Walton and A. Shelton McCray failed to fulfill their fiduciary duties under the Employee Retirement Income Security Act (ERISA).
Plan administrator Vance-Warren allegedly failed to pursue collection of $82,047 in mandatory employer contributions, lost earnings on those contributions and contributions recently funded into the trust. The suit also alleges that the company and other fiduciaries co-mingled plan assets with those of the company, and failed to collect and allocate interest income in the amount of $42,094 from December 2004 through October 2005 and plan years 2006, 2007 and 2008. The suit alleges that all of the fiduciaries failed to take reasonable action to rectify these fiduciary breaches.
The suit asks the court to bar the defendants from serving as fiduciaries to any employee benefit plan covered by ERISA, appoint an independent fiduciary to manage the plan and require the defendants to restore to the plan all losses with interest that resulted from their improper actions.
...
Chao v. Vance-Warren Comprehensive Health Plan Inc.
(Civil Action File Number 08-CV-827)
Workers Cautious about 401(k) Investments
Workers are increasingly cautious about investing in corporate retirement funds, having shifted money out of stocks, reduced how much they contribute and, in some cases, stopped contributions altogether or withdrawn money, according to a study released on Monday.
This is bad news for stock mutual funds as this report is confirming a trend we already knew existed:
New money input into stock funds is also trending lower:Stock holdings now account for 53.8 percent of assets, down more than 14 percentage points from a year ago. The decline reflects both the changes in allocation and the lower value of stock holdings.
Hewitt's analysis included 2.7 million U.S. employees and data collected through October.
INCREASED TRADING
"We're certainly seeing higher trading activity as people got their statements in the mail. The bad news is kind of sinking in," Hess said.
So far in November, balance transfers from equities are up further, with the money transferred to bond and stable value funds, as well as balanced funds, which mix equities, bonds and other assets with an eye toward preserving capital.
Also, another confirmation of trend of increased withdrawals and declining participation rates:More employers have put in incentives to invest, such as increasing their match, and some workers -- tempted by lower prices -- have increased contributions, she said. However, the proportion of new money dedicated to stocks is at an all-time low, at 58 percent.
This study is presenting some sobering thoughts for those in the industry. Now we know why the asset manager such as the likes of Fidelity are laying off staff due to the market downturn, as declines in asset values lead to lower management fee collections which is a direct hit to revenue.Some employees, especially in economically sensitive sectors like retail, have stopped contributing altogether. Also, since the credit crunch has made borrowing more difficult, more employees are also tapping 401(k)s for cash.
Overall, 6 percent of employees pulled money out, up from 5.4 percent a year ago. So-called hardship withdrawals, in which workers have to meet certain criteria but are still liable for penalties and additional taxes, are up 16 percent. Loans, which often come with low interest rates, are a better option, Hess said.
One factor to watch in coming months, according to Hewitt: More employers may need to reduce their 401(k) matches to conserve cash. In 2002, about 5 percent of companies cut back their matching contributions.
Whether current trends continue depends on the stock market's performance, Hess said.
"Some of the opt-outs could accelerate, the trading activity could accelerate, if markets keep going down. It's starting to scare people that it could be more than just the little dip that we saw back when the tech bubble burst."
Friday, November 14, 2008
Fidelity - Yet More Job Cuts
Combined with 1,300 cuts that Fidelity announced last week, the second round disclosed Friday will eliminate about 7 percent of the company's work force of about 44,400, said Anne Crowley, a spokeswoman for Boston-based Fidelity.
Details on which jobs are to be cut in the second round haven't been worked out. But the cuts will be spread roughly proportionally across Fidelity's operations, with the reductions occurring sometime in the first three months of next year, Crowley said.
In the first round, which is taking place this month, layoff notices began going out earlier this week, affecting management positions as well as lower-level jobs at privately held Fidelity. No fund managers or investment analysts are being laid off in the first round. Crowley said Friday it was too early to say whether that would be the case in the second round.
In a letter distributed to employees describing the initial cuts, Fidelity President Rodger Lawson said recent market volatility has hurt company revenue, leading him to conclude that "many of the cost improvement plans which would have been phased in by our business units over the next three years need to be accelerated."
In addition to its more than 11,000-employee Massachusetts operations in Boston and Marlborough, Fidelity has sizable offices in Florida, Kentucky, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Texas and Utah.
The latest cuts are in addition to reductions totaling about 800 jobs in two rounds earlier this year after Fidelity reorganized some business units.
While Fidelity is more diversified than many of its rival money managers, it still relies heavily on money management fees for much of its profit. Those fees are based on the assets held in Fidelity's more than 400 mutual funds, and assets there have been shrinking.
Cuts also have been announced in recent weeks at smaller mutual fund firms including Janus Capital Group Inc., which is eliminating about 115 jobs, or about 9 percent of its work force.
According to Financial Research Corp., assets at Fidelity's funds lost nearly 23 percent of their value through October of this year, to nearly $717 billion. The total excludes money-market funds, an area in which Fidelity is the industry leader based on more than $400 billion in assets. Overall, Fidelity managed $1.4 trillion as of Sept. 30.
Fidelity has sought to diversify beyond its core mutual funds in recent years, moving into areas such as individual retirement planning and employee benefit management.
It looks like more resumes will be hitting professional recruiters' desks soon and, if the cuts are in the benefits administration areas, once again, we can expect to see a great pool of candidates forming...
Wednesday, November 12, 2008
Weekend DOL Blotter - 11/10/2008
U.S. Department of Labor obtains default judgment appointing independent fiduciary for abandoned Georgia 401(k) plan
Atlanta – The U.S. Department of Labor has obtained a default judgment appointing M. Larry Lefoldt as the independent fiduciary for the 401(k) plan of defunct TDH Enterprise Corp. of Morrow, Georgia.
The judgment also removes TDH as a fiduciary to the plan and bars it from violating the provisions of the Employee Retirement Income Security Act. When TDH ceased operations in July 2005, the automotive repair company failed to terminate the plan and ensure that funds were distributed to participants. Another fiduciary to the plan, Barry Grosselin, has failed to administer the plan since that time.
“Even though the defendant has abandoned this plan, the Labor Department will not abandon the employees who count on these funds for their retirement,” said R.C. Marshall, regional director of the Labor Department’s Employee Benefits Security Administration (EBSA) in Atlanta.
The court order directs the independent fiduciary to assume control of the plan, including all assets, with the intention of terminating it and distributing any remaining assets to the plan participants. As of October 2006, the latest data available, the plan had five participants and $12,669 in assets.
Employers and workers can reach EBSA’s Atlanta Regional Office at 404.302.3900 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.
Chao v. TDH Enterprise Corp.
Civil Action File Number 1:07-cv-1764-JEC
"Suddenly Simply Having a Plan is Not Enough"
U.S. Labor Department sues to appoint independent fiduciaries to protect assets of abandoned 401(k) plans of Bay Area companies
San Francisco – The U.S. Department of Labor has sued Vigilance, Inc. of Sunnyvale, California, and its subsidiary Harmony Software Inc. of San Mateo, to obtain the appointment of independent fiduciaries to manage and distribute approximately $580,565.22 in assets to participants covered by the two companies’ abandoned 401(k) plans.
Separate lawsuits were filed against the Vigilance and Harmony Software in U. S. District Court for the Northern District of California, each alleging that the company failed to provide for the continued administration of its 401(k) plan. The suits seek removal of each company as fiduciary to its plan and the appointment of an independent fiduciary to terminate the plan and distribute its assets to participants and beneficiaries.
Both companies have ceased operations. Vigilance was a supplier of event software and Harmony Software was a business management software company.
Under the Employee Retirement Income Security Act (ERISA), employee benefit plans must be managed by named fiduciaries. In the absence of a plan fiduciary, participants and beneficiaries cannot obtain plan information, make investments or collect retirement benefits.
“The Department of Labor is committed to doing everything we can to assist workers whose plans are abandoned,” said Bradford P. Campbell, Assistant Secretary of the Labor Department’s Employee Benefits Security Administration (EBSA). “This legal action paves the way for the plan’s participants to receive retirement assets due them.”
The lawsuits resulted from investigations conducted by EBSA’s regional office in San Francisco. Employers and workers can contact the office at 415.625.2481 or toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Additional information can be found at www.dol.gov/ebsa.
Chao v. Vigilance, Inc. (Civil Action No. CV-08-5083)
Chao v. Harmony Software, Inc. (Civil Action No. CV-08-5084)
Thursday, November 6, 2008
Fidelity - More Job Cuts
BOSTON – Fidelity Investments is cutting nearly 1,300 jobs this month and the mutual fund company says more layoffs are coming early next year.
Boston-based Fidelity said Thursday it will lay off about 2.9 percent of its more than 44,000-employee work force later this month. The company isn't specifying which of its far-flung locations will be affected.
A second rounds of layoffs is planned in the first three months of next year. Fidelity says the number of those cuts will be determined in coming weeks.
Fidelity says the cuts are a response to global economic conditions, and unsettled financial markets.
Job-seekers beware: There will be a flood of ex-Fido's soon!
Tuesday, November 4, 2008
Weekend DOL Update - Radio Silence at the DOL???
One guess of mine is that Secretary of Labor Elaine Chao is wrapping up her work pending the transition/handoff of work to the new administration. This may be one reason for the slowdown.
Who knows?
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