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Release Date: 09/27/2002
Release Number: 341
Contact Name: Sharon Morrissey
Phone Number: 202.693.8664
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Cincinnati, Ohio - The U.S. Department of Labor
sued the fiduciary of the health and flexible spending plans of Eyeglass
Factory, Inc.(EGF) of Ferndale, Michigan, seeking payment of contributions
withheld from employees’ paychecks but never forwarded to the plans. The
suit, filed September 19 in federal district court in Ann Arbor, Michigan,
also alleged that Stephen Schaffer, EGF owner and the plans’ fiduciary,
failed to maintain fidelity bonds for the plans, as required by federal
law. |
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The suit alleged that from July 1, 2000, to October 1,
2000, Schaffer and EGF withheld and failed to forward to the health plan
contributions to be used for health insurance premiums. Also, the
defendants allegedly failed to forward some employee contributions to the
company’s flexible spending plan from January 1, 2000, through December
4, 2000. The employees’ paycheck withholdings were commingled with the
company’s general assets and used for its general operating expenses. |
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The department is asking the court to order the
defendants to make the plans whole, including lost opportunity costs, to
correct prohibited transactions in which they engaged, and to appoint an
independent fiduciary to oversee the plans once Schaffer has been removed
from his position with the plans. |
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The company, which was in the retail eyeglass business,
ceased operations on December 5, 2000. As of July 2000, the health plan
had 177 participants in 46 locations throughout Ohio, Michigan, Kentucky
and Pennsylvania. |
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Joseph Menez, director of the department’s Cincinnati
Regional Office of the Pension and Welfare Benefits Administration, noted
that employers with similar problems, who are not yet the subject of an
investigation by EBSA, may be eligible to participate in the Department's
Voluntary Fiduciary Correction Program (VFCP). Participation in the VFCP
requires employers to make workers whole but allows them to avoid EBSA
enforcement actions and civil penalties as well as any applicable excise
taxes. |
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"The VFCP gives plan sponsors a way to come into
compliance with ERISA by restoring workers' benefits while avoiding an
investigation by EBSA,” said Menez. “It protects workers' health and
retirement benefits and allows us to focus our resources on those who seek
to avoid compliance." For more information about the VFCP see
www.dol.gov/ebsa. |
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Employers and workers can contact the Cincinnati
Regional Office at 1.859.578.4680 or EBSA’s Toll-Free Employee &
Employer Hotline number, 1.866.275.7922, for help with any problems
relating to private-sector pension and health plans. The Cincinnati office
conducted the investigation in this case. |
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(Chao v. Stephen Schaffer, the Eyeglass Factory, Inc.
Civil Action No. 02-CV-60197) |
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U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7755. |
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