NEW YORK - The 2nd U.S. Circuit Court of Appeals ruled that the Telemundo Group Inc. Profit-Sharing Plan and its administrative committee violated federal pension law and and fiduciary responsibilities in not transferring investment gains on assets designated for a new profit-sharing plan.
The case stems from the spinoff of John Blair Communications Inc. from Telemundo, then known as John Blair & Co., in the 1980s.
Under the terms of the spinoff agreement, Telemundo was required to transfer about 89% of the $25 million in the parent company plan to the newly established profit-sharing plan of John Blair Communications.
The designated plan assets were valued at $22 million on June 30, 1988, but the assets were not transferred until four months later. At the time of the actual transfer, Telemundo did not include interest and investment earnings accrued by the Blair Communications plan assets for the four-month period.
The court held that Telemundo's failure to transfer the interest or earnings on the amount constituted a violation of Employee Retirement Income Security Act regulations governing plan spinoffs and, further, represented a breach of the fiduciary duties of Telemundo.
The court sent the case back to trial court where the plaintiffs from the John Blair plan will seek damages, including the missing investment earnings and legal costs.
The case is the first regarding a defined contribution plan's obligation to pay interest or earnings after an asset transfer, said Michael V.P. Marks, counsel for the plaintiffs from the law firm of Rosenman & Colin, New York.
Officials from Telemundo and John Blair Communications declined comment on the outcome of the case.
