In response to Perez v. Hartmann (docket number: 1:10-cv-00123) and Solis v. Hartmann (docket number: 1:12-cv-05503), the U.S. District Court for the Northern District of Illinois, Eastern Division, ordered that the trustees restore losses to Mid-States Express Inc. 401(k) Plan. In addition, the plan fiduciary is ordered to restore losses to Mid-States’ Employee Benefit Plan, a health plan.
The lawsuits, brought on behalf of plan participants, sought the recovery of $75,416.72 in unremitted employee contributions and participant loan repayments and associated lost opportunity costs to the Mid-States Express, Inc.’s 401(k) Plan, as well as employee contributions and unpaid health plan claims of the Mid-States Express Inc. Employee Benefit Plan totaling $3,983,980.
The district court has ordered that plan trustees Bruce Hartmann and Terry Hartmann are liable for the total debt of $75,416.72 in unremitted employee contributions, participant loan repayments and associated lost opportunity costs to the 401(k) plan. Within 10 days of the order, Terry Hartmann is ordered to pay $75,416.72 to the plan. The aforementioned losses will be offset by any sums actually deposited in the 401(k) plan account by Bruce Hartmann. In December 2013, Bruce Hartmann restored $20,000 to the Mid-States Express 401(k) Plan and has agreed to restore $30,000 in five annual payments beginning on August 1.
Bruce Hartmann was also found liable for employee contributions and unpaid health plan claims to the health plan totaling $3,983,980. The judge ruled the debts owed to both the 401(k) plan and health plan are not dischargeable under Bruce Hartmann’s Chapter 7 bankruptcy petition. Both Terry Hartmann and Bruce Hartmann are permanently enjoined from acting as a fiduciary to any plan covered by the Employee Retirement Income Security Act (ERISA) in the future.
The DOL lawsuits alleged that Bruce Hartmann, Mid-States’ chief financial officer and a trustee of the 401(k) plan, violated ERISA by failing to remit the employee contributions and loan repayments to the 401(k) plan, as well as failing to forward employee contributions and fund claims of the health plan. Terry Hartmann, Mid-States’ former chairman of the board and also a trustee of the 401(k) plan, was alleged to have violated ERISA by failing to ensure employee contributions and loan repayments were remitted to the 401(k) plan’s trust account.
Mid-States Express Inc. filed for Chapter 11 bankruptcy protection in March 2009, which was converted to a Chapter 7 bankruptcy in May 2009. Bruce Hartmann filed for Chapter 7 bankruptcy protection in November 2011.