NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION RESTORES OVER $27 MILLION TO BENEFIT PLANS

FROM:  U.S. DEPARTMENT OF LABOR
National Rural Electric Cooperative Association agrees to restore $27.3 million to benefit plans, settling US Labor Department claims
Association allegedly received excessive compensation in violation of federal law.

ARLINGTON, Va. ? The National Rural Electric Cooperative Association has agreed to restore $27,272,727 to three association-sponsored employee benefit plans covered by the Employee Retirement Income Security Act. This agreement follows an investigation by the U.S. Department of Labor’s Employee Benefits Security Administration that found the association selected itself as a service provider to the plans, determined its own compensation and made payments to itself that exceeded NRECA’s direct expenses in providing services to the plans, in violation of ERISA.

“Workers should be able to have confidence that their hard-earned retirement savings are being properly managed,” said Secretary of Labor Hilda L. Solis. “This settlement benefits tens of thousands of NRECA plan participants by reducing their plan administration costs.”

Under the terms of the agreement, NRECA will not provide administrative services to the NRECA Retirement Security Plan, the NRECA 401(k) Plan and the NRECA Group Benefits Plan without entering into a written contract or agreement with the plans that must be approved by an independent fiduciary. The independent fiduciary must determine whether the use of NRECA to provide administrative services to the plans is prudent and reasonable, determine the categories of direct expenses that NRECA may charge to the plans and the methods of calculating those expenses, and monitor NRECA’s compliance with certain terms of the agreement. The agreement also provides that during a 60-month period following the implementation date, NRECA shall discount the amount of permissible direct expenses for which it seeks reimbursement from all three plans in the amount of $22,727,272. The balance of the settlement payment, $4,545,455, already has been paid directly to the NRECA 401(k) Plan.

“This settlement sends a clear message to plan fiduciaries that they cannot profit from selecting themselves to provide services to plans,” said Phyllis Borzi, assistant secretary of labor for employee benefits security.
In addition to the amounts returned to the plans, NRECA will pay $2,727,276 in civil penalties.

Headquartered in Arlington, NRECA is a nonprofit trade association for electric power cooperatives. The sponsored plans are open to members of the trade association as well as the association’s employees. As of 2010, the latest information available, the NRECA 401(k) Plan had 68,970 participants, the NRECA Retirement Security Plan had 64,286 participants and the NRECA Group Benefits Plan had 73,644 participants.

The settlement follows an investigation by EBSA’s Washington District Office. Employers and workers can contact that office at 202-693-8700 or toll-free at 866-444-3272 for help with problems relating to private sector pension and health plans. Additional information can be found at http://www.dol.gov/ebsa.

COURT ORDERS CHICAGO-AREA INVESTMENT SERVICE PROVIDER TO REPLACE $1.2 MILLION TO WORKER RETIREMENT PLAN

Photo:  Justice and Humanity.  Credit:  Wikimedia.
FROM:  U.S. DEPARTMENT OF LABOR
US Labor Department suit results in court order requiring Chicago-area investment service provider to restore $1.2 million to worker retirement plans
CHICAGO — Following an investigation by the U.S. Department of Labor and resulting lawsuit, a federal court has issued a default judgment against the co-founder and director of the now defunct Elmhurst-based investment management company Results One Financial LLC. Steven Salutric has been ordered to restore $1,211,902.25 to four pension plan client accounts from which he allegedly withdrew funds from 2005 through 2009 in violation of the Employee Retirement Income Security Act.

"It is particularly egregious when those entrusted with protecting workers' retirement assets jeopardize them by committing illegal acts for personal gain," said Secretary of Labor Hilda L. Solis. "The Labor Department is committed to taking all necessary actions to ensure that workers' hard-earned income and benefits are protected. America's workers deserve and are entitled to keep what they have rightfully earned for themselves and their families."

The department's suit, filed in federal district court in Chicago, alleged that Salutric misdirected the assets of client plans to entities in which he had an interest, including a film distribution company, a restaurant and a real estate partnership, and to a church where he served as treasurer. Results One Financial LLC was a registered investment advisory company that provided services to a wide range of clients, including ERISA-covered employee benefit plans.

"Worker retirement savings accounts were given special protections by Congress due to the significant role they play in providing a secure retirement," said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. "The Labor Department's Employee Benefits Security Administration will continue to help workers understand their rights and fight to protect their assets."

The court order requires Salutric to restore all losses, including lost opportunity costs, to the four pension plan clients and to correct the prohibited transactions involved. The judgment also bars Salutric from serving as a fiduciary or service provider to any employee benefit plan governed by ERISA in the future.

EBSA's Chicago Regional Office investigated the case in coordination with the Chicago Regional Office of the U.S. Securities and Exchange Commission. Employers and workers can contact EBSA's Chicago office at 312-353-0900 or the agency's toll-free number at 866-444-3272 for help with problems related to private sector health and pension plans.