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EBSA News Release: [11/30/2006]
Contact Name: Peter Hong or Gloria Della
Phone Number: (202) 693-4676 or x8664
Release
Number: 06-2028-KAN
U.S. Labor Department Sues Iowa Association to Recover Millions
in Employee Benefit Plan Assets
DES MOINES, Iowa — The U.S. Department of Labor filed a lawsuit against the Iowa Association of Business and Industry (ABI), Des Moines, Iowa, for retaining all the proceeds from a stock distribution by Principal Mutual Insurance Co. that was based on employee benefit plan premiums paid to the insurer by employers participating in the association and their employees. Approximately 1,500 employers are members of the trade association.
"The department is taking this legal action on behalf of the association's members and their workers," said U.S. Secretary of Labor Elaine L. Chao. "The benefit plans belonging to these Iowa businesses and workers are due millions of dollars and the department is seeking a court judgment to recover these assets for them."
The association received 870,373 shares of Principal stock when the insurer converted from a mutual insurance company to a corporation in 2001. As a result of the change in organization, Principal distributed compensation in the form of cash or stock to eligible policyholders. At the time of the distribution, ABI operated a group insurance program whereby participating employers purchased life insurance, long-term disability, medical expense and other types of insurance coverage from Principal and paid premiums directly to Principal. After receiving the Principal shares, ABI sold the stock and currently retains the proceeds, after expenses, in a trust.
The lawsuit alleges that ABI violated the Employee Retirement Income Security Act (ERISA) when it accepted and retained proceeds from the sale of the Principal stock. The suit seeks a court judgment declaring that proceeds from the stock that are attributable to employee contributions are plan assets and to bar ABI from receiving any portion of the insurance proceeds that are deemed plan assets. The department also asks the court to appoint an independent fiduciary to determine the amount of the proceeds that are plan assets and that any plan assets be turned over to that fiduciary for distribution to appropriate beneficiaries.
The suit, filed in the U. S. District for the Southern District of Iowa, resulted from an investigation conducted by the Kansas City regional office of the Employee Benefits Security Administration (EBSA). Employers and workers can reach the regional office at (816) 426-5131 or EBSA toll-free at 1-866-444-EBSA (3272), for help with problems relating to private-sector retirement and health plans.
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