The U.S. Department of Labor announced that the U.S. District Court for the Northern District of Ohio has entered a default judgment against Markham Machine Co. and its owner, James Markham, requiring them to restore more than $134,000 to the company’s retirement plan.

According to court documents, the company and its owner violated the Employee Retirement Income Security Act (ERISA) by failing to handle employee retirement contributions properly over a four-year period. Investigators found that the company withheld $101,613 in employee contributions and loan repayments but did not deposit the funds into the plan as required.

In its announcement, the Department of Labor stated that the order requires Markham and the company to restore all plan losses, including employee contributions, loan repayments, and lost opportunity costs totaling $134,292. The court also permanently barred both parties from serving as fiduciaries to any ERISA-covered employee benefit plan.

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Understanding ERISA Fiduciary Responsibilities

Under ERISA, employers who sponsor retirement plans have defined fiduciary duties to their employees. One of the key requirements is that employee salary deferrals and loan repayments must be deposited “as soon as they can reasonably be segregated” from company assets. For small plans with fewer than 100 participants, this must happen no later than the 15th business day of the following month.

Guidance from the Department of Labor and IRS notes that, in most cases, employers should be able to remit participant contributions within just a few business days. The 15-day rule represents a maximum deadline, not a safe harbor period that employers can routinely use.

Failure to meet these deadlines is treated as both a prohibited transaction and a breach of fiduciary duty. Fiduciaries may be held personally liable for plan losses and can be barred from serving in that role in the future.

Impact on Business Owners and Employees

The case highlights the financial and legal consequences that business owners may face when employee retirement plan contributions are not managed in compliance with federal law. Court records noted that Markham’s own retirement account was used to offset losses to the plan, illustrating how personal assets may be applied to restore plan funds in fiduciary breach cases.

For employees, delayed or missing contributions can significantly impact retirement savings. If contributions are not deposited on time, employees forfeit the opportunity for investment growth and compounding returns. In this case, workers lost both their original contributions and the earnings those funds could have produced over four years.

The court appointed AMI Benefit Plan Administrators Inc. as an independent fiduciary to take over administration and termination of the retirement plan, ensuring that remaining assets are properly distributed to participants.

Resources for Self-Correction

The Department of Labor administers two programs that allow employers to voluntarily correct ERISA violations before enforcement action is taken. The Voluntary Fiduciary Correction Program encourages employers and plan officials to self-report and correct violations, while the Delinquent Filer Voluntary Compliance Program helps employers catch up on required annual reporting.

According to the department, these programs are designed to encourage voluntary compliance and may reduce potential penalties compared to formal enforcement actions. The Employee Benefits Security Administration maintains a toll-free line at 866-444-3272 for inquiries about ERISA compliance.

Court filings in the Markham case underscored the consequences of failing to meet fiduciary obligations, highlighting the importance of timely contribution deposits and ongoing compliance monitoring.

Source: US Department of Labor obtains default judgment requiring fiduciaries to pay back $134K to retirement plan