DOL Complaint Alleges Fiduciary Failures by Adviser

A complaint filed in a Pennsylvania district court by the DOL’s Employee Benefits Security Administration alleges a list of ERISA infractions related to fees, documents, disclosures and processes by a 3(21) fiduciary firm.

An investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) suggests a Pennsylvania-based advisory and benefits consultant, Belanger and Co. Inc., violated the Employee Retirement Income Security Act (ERISA) by improperly transferring plan assets and failing to fully disclose fees, among other allegations.

Belanger and Co. describes itself as is “a fee-only, independent, qualified retirement plan administrator and consultant for small to medium sized companies.” According to EBSA, the firm on a variety of occasions “failed to timely remit assets to certain plans, fully and timely terminate some plans and process some plan distributions, destroying documents, and making errors in the administration of some plans.”

The complaint seeks restoration of all plan losses, lost earnings, and disgorgement to the plans of “all unjust enrichment received by the defendants, and removal of the defendants as fiduciaries and service providers to any ERISA-covered employee benefit plan that they serve as fiduciaries and service providers.” Additionally, it seeks an injunction permanently preventing the defendants from exercising custody, control, or decisionmaking authority with respect to the assets of any employee benefit plan covered by ERISA, preventing the defendants from acting directly or indirectly as a service provider for any employee benefit plan subject to ERISA. It also seeks to bar the defendants from engaging in any future violations of ERISA.

EBSA filed the complaint in the U.S. District Court for the Eastern District of Pennsylvania. In the text of the complaint, EBSA investigators note the firm serves as an “administrator of employee benefit plans within the meaning of Sections 3(3) and (16) of ERISA, 29 U.S.C. §§ 1002(3), (16),” working with plans in this capacity throughout Montgomery, Pennsylvania. A number of small businesses are called out by name in the complaint as having been mistreated, ranging from manufacturers to ambulatory care centers and a yoga studio.

NEXT: EBSA allegations 

According to the text of the compliant, Belanger carried sufficient discretion over clients’ plan assets to serve as a 3(21) fiduciary “and a party-in-interest as that term is defined in Sections 3(14) (A) and (C) of ERISA, 29 U.S.C. §§ 1002(14) (A) and (C).”

“During the relevant period, the defendants had the ability to withdraw plan assets from each plan’s custodial account,” EBSA explains. “This included the ability to transfer plan assets to the company. The defendants were able to make these transfers without notifying the plans’ sponsors.”

Using this authority, EBSA says the defendants enacted a variety of ERISA violations against a significant number of clients. For example, when one client decided to move to a different adviser following an audit, Belanger “did not transfer all of the plan assets to the new service provider. Instead, approximately $30,000 was left in the plan’s account. [The plan sponsor] was not notified of this action.”

In another case, EBSA says Belanger was called on to terminate a plan in 2005. “However, as of November 1, 2010, assets remained in the plan’s account. In November 2010, all of the assets remaining in the plan’s account were transferred to the [Belanger] company’s account with the plan’s asset custodian and then transferred to the company’s corporate bank account.”

In other examples called out by EBSA, Belanger is accused of willingly destroying documents and obscuring fees or assets rightfully owed back to clients. As such, alongside damages for plaintiffs, EBSA is seeking an order permanently enjoining the defendants from acting, directly or indirectly, as a service provider for any employee benefit plan subject to ERISA.

Kenneth Belanger, president of Belanger and Co., Inc., tells PLANADVISER the firm has “cooperated fully in this investigation by the DOL and we are determined to rectify any errors which occurred as a result of inadequate training and/or supervision.”  

The full complaint is available online here