Maryland Orders Employer to Fork Over Missed Contributions to 401k Plan

Baltimore, MDOn February 1, 2022, the District Court of Maryland ordered Bicallis LLC and its owner, Bryan Hill to restore missing contributions to the Bicallis 401(k) Plan. Bicallis was a Baltimore-based logistics, engineering and management support services company with 25 employees. The contributions were owed to the pension plan under the law and the express terms of the plan.

Getting an order is one thing, but finding the money may be quite another. The company ceased operations in 2022. Hill then turned his attentions to a cannabis business, which he later sold. Then there was an unpaid divorce settlement, not to mention the federal tax liens and a contempt judgment. Participants are now at the “Show me the money” stage of things.

No payment

On May 6, 2022, the Employee Benefits Security Administration obtained a consent judgment that required Bicallis and Hill to pay $151,942 to AMI Benefit Administrators, which acted as an independent fiduciary charged with holding and ultimately paying out the money to participants. At the time, this sum represented:

• participants’ payroll contributions to the 401k plan;
• matching and safe harbor contributions owed by the company from October 2017 through December 2019;
• interest due on the missing contributions; and
• costs to appoint an independent fiduciary.

Hill/Bicallis never forwarded the money.

Okay, okay. Now for real

The consent decree outlined a repayment plan to restore the funds, removed Bicallis and Hill from their fiduciary positions with the plan and permanently barred Bicallis and Hill from serving in a fiduciary capacity for any plan covered by ERISA in the future.
But the defendants never came through with the promised money. They defaulted on the judgment, and the DOL filed a motion to hold Hill and the company in contempt, which the court granted in June 2023. As part of its contempt finding, the court ordered that Bicallis and Hill pay a fine of $100 per day until the amounts owed were paid in full.

Sorry, totally distracted

In the meantime, however, Hill sold an unrelated medical marijuana company, Arcarius LLC. The proceeds of that sale, roughly $388,438, are being held in trust to satisfy a property settlement obligation under a divorce agreement between Hill and his former wife. Hill will be entitled to one half of what remains of that sum after deductions for:

• attorney’s fees;
• tax liens to which Hill is subject for 2015, 2018, and 2019; and
• other costs and expenses.

The latest turn of events, the “Consent Order of Forfeiture” entered in February 2024 in Maryland District Court, is the legal mechanism that allows plan participants to reach the proceeds of the Arcarius sale. (A telling footnote in the order suggests that Hill, himself, has had difficulty in collecting the agreed-upon purchase price from Arcarius’s buyer.) Whether there will ultimately be enough money to satisfy the obligations to the Bicallis 401k retirement savers looks doubtful.

The Trustee anticipates that the final sale proceeds to be distributed — only half of which Hill is entitled to — will be significantly less than it currently holds in trust. That is less than half of $388,438, or $194,219. The tax liens and divorce expenses may devour quite a bit of this. And, of course, the interest on the amount originally owed to the participants and the $100 per day penalty, have continued to accrue.

ERISA requirements, no insurance

Bicallis’s obligation to pay money into the 401k plan arises from the law’s requirement that fiduciaries run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. In addition, they must follow the terms of plan documents. The requirement that the plan sponsor pay matching contributions, for example, arises from the terms of the plan document, rather than ERISA itself.

As drafted in 1974, however, ERISA originally imagines a defined benefit scheme, where participants are promised a defined benefit at retirement. That benefit was protected in a variety of ways, including through government-backed insurance provided by the Pension Benefit Guaranty Corporation (PBGC). Benefits paid by defined contribution plans, like the Bicallis 401(k) Plan are not insured by the PBGC.

What’s next for Bicallis 401k plan participants?

For now, it is a waiting game. When what remains of the Arcarius sale proceeds is ultimately remitted to AMI Benefit Administrators for the benefit of plan participants, they may face some difficult decisions. Should participants settle for less than they are owed to avoid continuing legal and administrative expenses? Does Hill have other assets that are worth pursuing? In the end, it appears that plan participants may never be made completely whole.