EBSA Sues Illinois Transportation Firm Over Plan Payments

January 12, 2010 (PLANSPONSOR.com) – The U.S. Department of Labor (DoL) has filed suit against the owners of a bankrupt Chicago-area company for diverting their employees’ health care premium payments and 401(k) contributions and loan repayments.

A DoL news release said the suit alleges that Bruce and Terry Hartmann, owners of Mid-States Express Inc. of Aurora, Illinois, violated their fiduciary duty under the Employee Retirement Income Security Act (ERISA) by improperly withholding $1.26 million in employee health contributions and not paying $3 million in employee medical claims.  The suit also accuses the owners of not remitting $65,000 in retirement contributions and loan repayments, and not timely remitting more than $1.5 million in 401(k) plan participant contributions and loan repayments.

“These defendants blatantly misused their employees’ retirement and health benefit contributions for personal gain,” said Phyllis C. Borzi, assistant secretary of labor, head of the DoL’s Employee Benefits Security Administration (EBSA), in the news release.  “Despite financial hardships, employers and plan officials are obligated to forward those employee contributions to the plans.”

The DoL said Mid-States Express provided transportation delivery services until it closed down on March 27, 2009 and is company is currently in Chapter 7 bankruptcy. The company 401(k) plan covered 656 participants and had $3,073,342 in assets as of December 31, 2007, while the company health plan covered 378 active participants as of December 31, 2007.

The PBGC recently announced it has assumed responsibility for three underfunded pension plans of the company (see PBGC Assumes Pensions of Illinois Trucking Company).