Fiduciary

The plan fiduciaries for a 401(k) Plan received a letter from DOL advising them that after an extensive investigation it appears that they have violated several provisions of ERISA. The DOL alleges the plan fiduciaries: did not forward amounts withheld from employees on a timely basis; improperly allowed the plan to make loans to shareholder-employees; make delinquent employer contributions to the plan; failed to make timely distributions to terminated employees; and filed Annual 5500 Reports which falsely indicated that the plan was funded in accordance with the minimum funding requirements of ERISA. 

Outcome: Total defense costs and settlement exceeded $250,000.

Members of an ESOP allege breach of fiduciary duty against the plan’s trustees who also happen to be D&Os of the company. It is alleged that the ESOP was damaged by these D&O trustees paying themselves excessive bonuses in the hundreds of thousands annually over a number of years thus preventing the stock value from rising. Though it was argued that the D&Os were acting under the business judgment ruling in managing the company rather than as trustees/fiduciaries of the plan when awarding the bonuses, the matter resolved for about $2.5 million and other non-monetary relief. 

Outcome: Though the $2.5 million settlement wasn’t covered, defense fees exceeded $600k.

The trustees of an Employee Stock Ownership Plan (ESOP) were sued by the Department of Labor( DOL) and company employees who faulted the fiduciaries for making imprudent investment decisions. The court ultimately found the fiduciaries failed to conduct impartial reviews of investment options. 

Outcome: The suit finally settled for $1,000,000.

A particular state department of labor advises a company that it may commence a lawsuit against it for the funds that it allegedly lost from its 401(k) Plan. The company reportedly transferred the funds from a 401(k) plan managed by one company to another. 

Outcome: This situation settled without a lawsuit being brought against the company, but the defense costs exceeded $25,000.

Department of Labor brought suit against a company, its CEO, and its COO alleging that both the CEO and COO sold shares to the ESOP for a grossly inflated per share amount due to a fraudulent appraisal that used aggressive projections that were not in line with past performance and improper comparisons to much more successful companies. 

Outcome: Defense exceeded the $1 million limit of liability.