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News Release

U.S. Department of Labor For Immediate Release


Office of Public Affairs Date: September 27, 2002
Chicago Contact: Sharon Morrissey
Release Number 341 Phone: (202) 693-8664

Labor Department Sues Eyeglass Factory Plans’ Official


For Failure to Forward Employee Contributions

Cincinnati – The U.S. Department of Labor sued the fiduciary of the health and flexible spending
plans of Eyeglass Factory, Inc.(EGF) of Ferndale, Mich., seeking payment of contributions withheld
from employees’ paychecks but never forwarded to the plans. The suit, filed Sept. 19 in federal district
court in Ann Arbor, Mich., also alleged that Stephen Schaffer, EGF owner and the plans’ fiduciary,
failed to maintain fidelity bonds for the plans, as required by federal law.

The suit alleged that from July 1, 2000, to Oct. 1, 2000, Schaffer and EGF withheld and failed to
forward to the health plan contributions to be used for health insurance premiums. Also, the defendants
allegedly failed to forward some employee contributions to the company’s flexible spending plan from
Jan. 1, 2000, through Dec. 4, 2000. The employees’ paycheck withholdings were commingled with the
company’s general assets and used for its general operating expenses.

The department is asking the court to order the defendants to make the plans whole, including lost
opportunity costs, to correct prohibited transactions in which they engaged, and to appoint an
independent fiduciary to oversee the plans once Schaffer has been removed from his position with the
plans.

The company, which was in the retail eyeglass business, ceased operations on Dec. 5, 2000. As of July
2000, the health plan had 177 participants in 46 locations throughout Ohio, Michigan, Kentucky and
Pennsylvania.

Joseph Menez, director of the department’s Cincinnati Regional Office of the Pension and Welfare
Benefits Administration, noted that employers with similar problems, who are not yet the subject of an
investigation by PWBA, may be eligible to participate in the Department's Voluntary Fiduciary
Correction Program (VFCP). Participation in the VFCP requires employers to make workers whole but
allows them to avoid PWBA enforcement actions and civil penalties as well as any applicable excise
taxes.

"The VFCP gives plan sponsors a way to come into compliance with ERISA by restoring workers'
benefits while avoiding an investigation by PWBA,” said Menez. “It protects workers' health and
retirement benefits and allows us to focus our resources on those who seek to avoid compliance." For
more information about the VFCP see www.dol.gov/pwba

Employers and workers can contact the Cincinnati Regional Office at 1-859-578-4680 or PWBA’s toll
free number, 1-866-275-7922, for help with any problems relating to private-sector pension and health
plans. The Cincinnati office conducted the investigation in this case.

(Chao v. Stephen Schaffer, the Eyeglass Factory, Inc.) Civil Action No 02-CV-60197
U.S. Labor Department releases are accessible on the Internet at http://www.dol.gov. The information in this news release
will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the COAST office.
Please specify which news release when placing your request. Call (202) 693-7773 or TTY (202) 693-3911.

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