The Court has issued a memorandum opinion in Micone v. iProcess Online, Inc., 2025 WL 1158885 (D. Md. 2025), which concerns the mishandling of 401(k) participant contributions. After an investigation into the employer's 401(k) plan funds, the U.S. Department of Labor (DOL) sued the company, which also served as plan sponsor and ERISA plan administrator. The DOL claimed that the fiduciaries failed to deposit participant contributions in the plan, instead commingling the funds with company assets. Likewise, the DOL alleged that the employer failed to make all required matching contributions and process participant distribution requests promptly.
Participant contributions become ERISA plan assets; therefore, plan fiduciaries must deposit them in trust as soon as possible, separating them from the employer's general funds. The investigation revealed that the employer failed to remit over $175,000 withheld from employee paychecks over seven years as plan contributions to their individual retirement plan accounts.
The company did not appear in the case or otherwise respond to the DOL's claims, so the Court ruled in the agency's favor, noting that the company's officer had been convicted of embezzlement and was subject to various lawsuits by plan participants. Damages awarded to plan participants remain unpaid; therefore, the Court ordered the fiduciaries to pay the remaining balance of the funds, which exceeds $100,000, within 60 days. The Court also held the fiduciaries jointly and severally liable for the funds and barred them from serving in any ERISA fiduciary role in the future. Finally, the Court appointed an independent fiduciary to distribute the remaining plan assets at the expense of the former fiduciaries.
This case serves as a reminder that the DOL can and will investigate mishandled 401(k) funds and take enforcement action against fiduciaries when needed. Furthermore, a successful breach of fiduciary duty claim under ERISA can result in personal liability for the fiduciaries' plan losses.
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