Ex-Business Owners on the Hook for Plan Losses

January 6, 2011 (PLANSPONSOR.com) – The former owners of a St. Paul, Minnesota, business services company are jointly liable for repaying losses to the company’s retirement plan after the owners used plan assets to pay certain creditors, a judge has ruled.

U.S. District Judge Ann D. Montgomery of the U.S. District Court for the District of Minnesota turned aside arguments by defendant Joel Blackford that he was not a fiduciary under the Employee Retirement Income Security Act (ERISA).  Montgomery ruled both Joel Blackford and co-defendant Susan Blackford qualified as fiduciaries. Susan Blackford, the plan’s administrator, admitted she was a fiduciary.

A Department of Labor (DoL) lawsuit alleged that the Blackfords co-mingled between $12,000 and $14,000 from plan assets into their company’s general account between January 1, 2003, and December 31, 2006, and used the extra funds to pay creditors. The plan suffered losses of $13,218 as a result of the violations, according to the suit.

Montgomery concluded that since the funds were mishandled under ERISA and that both of the Blackfords were fiduciaries, both were to be held liable for repaying the plan’s losses.

The case is Solis v. Blackford, D. Minn., No. 09-2148 ADM/JSM.