Employee Stock Ownership Plans—or ESOPs—have become a popular way to fund retirement accounts or provide additional bonuses to employees. Kellogg Auto Supply of Cortland has such a plan for its employees.
Under the plan’s terms, plan participants receive a bonus disbursement based on the company’s stock performance during the previous calendar year.
According to a complaint filed with the U.S. Department of Labor (DOL), Kellogg disbursed benefits in 1999 based on the stock’s 1998 valuation. But it made no further distributions until 2008. The DOL filed suit charging the company and its president, Richard Coates, with violating the Employee Retirement Income Security Act (ERISA) when it failed to pay disbursements for those years.
The DOL is asking the company to make all distributions, plus interest or opportunity costs. Additionally, the complaint seeks an injunction against the company and Coates, barring them from administering any ERISA-covered plan.
Note: Times are tight and that money may look tempting, but the DOL’s Security Administration lives to catch employers with their hands in pension plans. In fact, EBSA recovered $1.2 billion in retirement and health assets during federal fiscal year 2008.
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