In reaction to an investigation and lawsuit involving two trustees, Garden Homes Management Corp. of Stamford has agreed to institute changes that ensure plan assets are not used to make loans or provide benefits to associated entities.
Loans totaling $1.7 million that federal labor agents deemed dubious were repaid.Â
“The transfer of plan assets to parties in interest or self-dealing by plan trustees is a clear violation of Employee Retirement Income Security Act which will not be tolerated,” said James Benages, director of the Boston Regional Office of the federal Department of Labor”™s Employee Benefits Security Administration.
According to a consent judgment obtained by the Department of Labor resolving a lawsuit alleging violations of the Employee Retirement Income Security Act, the loans and benefits will not be made to defendants who have conflicting interest in the future.
The department”™s suit, filed in the U.S. District Court for the District of Connecticut, alleged that the company and trustees Joel E. Freedman and Naomi K. Freedman violated the Employee Retirement Income Security Act by causing the company”™s profit-sharing plan to loan approximately $1.7 million to partnerships controlled by the defendants and related parties.
The loan has been repaid.
“While the loans we repaid in this case, these loans were still prohibited transaction under the law,” said Benages.
The Employee Retirement Income Security Act, the federal law that protects private-sector employee benefit plans, requires that plan assets be used only for the benefit of the plan”™s participants and beneficiaries. In this case, the Garden Homes Management”™s profit-sharing plan covers 60 employees of the company and has assets of approximately $6 million.
The Employee Benefits Security Administration”™s Boston Regional Office led the investigation.
