No doubt many have heard or read that Eye Centers Of Tennessee has been ordered by a federal court to return almost 1$ million dollars to their own company operated retirement fund.  The order is rather complex to read, but it gives the impression that Dr. Patterson and office administrator Raymond Mays committed an illegal act – yet no charges were filed.  Only an order to return the funds the 401k plan of the employees.  Patterson and Mays made several large investments using the 401k money when, in fact, they were not authorized by law to handle the money.  A statement from Eye Centers reads “These investments mainly involved the buying and selling of real estate in areas where Eye Centers has offices.”  “In an effort to maximize the return to plan participants, the plan utilized companies tied to Dr. Patterson and Mr. Mays at little or no cost.”

The problem is that the transactions were not allowed under ERISA regulations, which prohibits transactions between a plan and “disqualified persons,” though exemptions may be granted by the department. Those exemptions are to be sought before the transactions take place. Disqualified persons include fiduciaries of a plan, employers whose employees are part of the plan, and their relatives, among others. 

Eye Centers of Tn went on to say:  “While these transactions did not comply with the requirements of ERISA, and were therefore ‘prohibited transactions,’ it has always been the position of Dr. Patterson and Mr. Mays that the transactions did not cause a loss to the retirement plan.”

In addition, both Mays and Patterson are prohibited from serving as fiduciaries for any plan covered by ERISA.