DOL Seeks More than $1.6M in Losses for Profit Sharing Plan

A health care company filed no annual reports, did not perform valuations and took more than $1.6 million in improper distributions in violation of ERISA, the DOL alleges.

Alliance Home Healthcare Inc., a Palos Hills, Illinois, home health care provider, faces a suit by the Department of Labor (DOL) alleging that the company, its profit-sharing plan and two of its trustees improperly authorized distributions of $1,601,908 in profit-sharing plan assets, in violation of the Employee Retirement Income Security Act (ERISA).

Trustees named in the suit are Reginaldo Sulit and Dalisay Sulit, the company’s owners and the plan’s two named trustees. Dalisay Sulit is the mother of Reginaldo Sulit.

Dalisay Sulit, president, and Reginaldo Sulit, secretary/treasurer, allegedly took distributions of more than $1 million, to which they were not entitled, according to the DOL. The suit asserts that these plan withdrawals were not in the best interests of the participants and beneficiaries of the employee benefit plan, as required by the law. The withdrawn plan assets were used for non-plan purposes, including directly benefiting the company.

Alliance Home Healthcare established its profit sharing plan on January 1, 2000. As of December 31, 2006, the last year an annual report was filed, the plan had 127 participants and $1.6 million in assets.

For plan years 2009 through 2014, Reginaldo Sulit and Alliance failed to direct the trustees to perform year-to-year plan valuations or an annual accounting. This meant that Reginaldo Sulit and Alliance did not have updated account information upon which they could accurately calculate individual participant account balances for each plan participant and determine correct distribution amounts for eligible plan participants.

NEXT: Distributions in excess of account balances

From January 1, 2008 through the present, Reginaldo Sulit, as plan trustee, made distributions from the plan. Plan assets were assigned sometimes to Reginaldo Sulit, although he was not eligible to receive plan distributions, sometimes to the company accounts for Alliance, and sometimes to Dalisay Sulit. Based on her participation in the plan, as of December 31, 2008, Dalisay Sulit’s individual account balance was approximately $269,300.11. From May 30, 2012 to February 27, 2014, she received approximately $754,699.90 in excess of her December 2008 account balance.

Filed in the U.S. District Court for the Northern District of Illinois, the suit seeks restoration of all related plan losses, including lost opportunity costs, and a court order requiring the defendants to account for and restore losses to plan participants.

The department is also seeking to permanently enjoin the defendants from serving as fiduciaries or service providers to any plan covered by ERISA. The suit requests the appointment of an independent fiduciary, who would be compensated at the company’s expense, to distribute the plan’s assets to participants and beneficiaries, and to terminate the plan.

“Plan funds must be invested in the interest of workers and retirees, not used to prop up a struggling firm,” said Jeffrey Monhart, regional director of the department’s Employee Benefits Security Administration (EBSA) in Chicago. “Too often, we see employee benefit plan funds used illegally by company owners and management, jeopardizing the financial security of workers and retirees.”

The DOL case document can be viewed here.