An investigation by the department’s Employee Benefits Security Administration (EBSA) found that the fund’s trustees made loans to participants that were improper, unsecured and allowed to become delinquent. Pursuant to the consent order, the amount of the improper loans – totaling more than $1.7 million – will be subject to corrected loan documentation, repaid by plan participants or treated as taxable distributions.
David Fensler and Anthony Monaco, as trustees to the fund, allegedly approved at least 194 improper loans from the fund to individual participants between January 1997 and December 31, 2009. As of that date, none of the loans approved by the trustees had been paid back to the fund in full, and only six of the participants had ever made any payments for loans issued to them. Fensler and Monaco allegedly made no effort to enforce the terms of the loan documents or collect payments, in violation of the plan’s governing documents and the Employee Retirement Income Security Act (ERISA).
Under the terms of the consent order, the fund’s trustees will correct all prohibited transactions in which they engaged since August 2008 and will ensure that all loans meet all the requirements of ERISA and the Internal Revenue Code (IRC) going forward. Specifically, the plan’s governing documents will be amended to include requirements that a participant must demonstrate and document an emergency need before he or she can receive a loan from the fund.
The fund will issue an Internal Revenue Service Form 1099 at the end of the plan year for the full unpaid loan, in the event a loan is delinquent for more than 120 days. For all loans issued after August 30, 2008, the fund will issue a notification to the participant within 45 days that the individual will receive a Form 1099 for plan year 2012 for the outstanding loan balance plus any outstanding interest in accordance with IRC rules.
The United Employee Benefit Fund was established by the Professional Workers Master Contract Group and the National Production Workers Union Local 707 to provide welfare, medical, death, disability and child care facility benefits to the fund’s participants. As of December 31, 2009, the fund had approximately 281 participants.