Sunkist Growers Inc. and its pension plan fiduciaries were ordered by a federal judge to restore $1.6 million in plan losses to the company's three defined benefit plans. Sunkist Growers must also pay a 20% penalty of $324,000 for misused funds and lost opportunity income.
The decision by Judge Percy Anderson in the U.S. District Court in Los Angeles resulted from an investigation by the Department of Labor's Employee Benefits Security Administration that found the Sherman Oaks, Calif.-based citrus farming cooperative and plan fiduciaries failed “to act solely in the interest of plan participants,” said Phyllis Borzi, assistant secretary of labor.
According to Form 5500 filings for 2012, the Sunkist Plan A had assets of $228 million, Plan N had assets of $18 million and the hourly plan had $26.5 million in assets.
EBSA investigators found that from 2006 through April 2011, defendants used plan assets to reimburse company expenses, including salaries and benefits. An EBSA official who declined to be identified said some company officials were being reimbursed for providing services to the plans, despite being salaried employees.
The company also based reimbursements on projected, rather than actual, expenses and did not restore an estimated $118,909 in overpayments, EBSA officials claimed.
The judgment, entered Oct. 18, requires appointment of an independent fiduciary to review and approve any future services provided by Sunkist Growers to the plans.
In a statement, Sunkist said it cooperated completely in the voluntary settlement and the DOL audit. “Sunkist never made any attempt to conceal its expense practices,” the statement said, attributing it to a “basic misunderstanding on Sunkist's part” on charging for plan services provided by employees, instead of third parties. “Moving forward, the services in question will be furnished by such third parties,” according to the statement.
