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Benefits November 23, 2004
Settlement Reached in Company Stock, Lump-Sum Distribution ERISA Suits
November 23, 2004 (PLANSPONSOR.com) - Two separate
Employee Retirement Income Security Act (ERISA) lawsuits -
one alleging imprudent fiduciary behavior regarding company
stock and the other involving unfair benefits distribution -
have been settled in the past two months.
Reported by Kip McDaniel
In LaManna et al. v. Steinberg, et al., filed in the Eastern District of Pennsylvania, the plaintiffs alleged that the Reliance Insurance Company’s employee benefits plan fiduciaries neglected their duties by continuing to hold company stock when it was no longer prudent to due so, according to a press release from the plaintiffs’ lawyer. Reliance, which is in liquidation, was paying directors and officers dividends while failing to make a profit and going into debt. When this practice was revealed in a January 2001 Vanity Fair article, the stock plummeted, according to the plaintiffs’ charges.
The plaintiffs filed suit, claiming that the employee benefit plan fiduciaries knew or should have known that it was no longer a prudent decision to hold company stock, which resulted in huge losses to the company pension plan. A $5 million settlement was reached, according to the plaintiffs’ lawyers, for the participants and beneficiaries of the Reliance Savings Incentive plan.
In the ERISA class action suit of Keehner v. APL Retirement Account Plan, et al., filed in the Northern District of California, a $1.125 million settlement was reached over charges that plan participants who elected to take their benefits in lump-sum form were short changed by not receiving the cost-of-living adjustments that they would if they had chosen an annuity.
An amendment was also made to the plan as a result of the lawsuit so that in the future, plan participants who elect the lump-sum distribution will receive cost-of-living adjustments, according to the press release.