Benefits September 20, 2005

New "Bill of Rights" for Retirement Plan Participants

September 20, 2005 (PLANSPONSOR.com) - Invesmart, Inc. has launched the "Retirement Plan Participant's Bill of Rights", a guide for Defined Contribution retirement plan participants.
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The company said in its press release that the document articulates what participants should expect from plan sponsors and plan providers for the best chance at a secure retirement.

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The seven points in the guide, according to the release, are:

  • The right to know the size of the retirement savings (“Nest Egg”) they will need in retirement to live in financial security.
  • The right to know on a regular basis whether they are on track to building the appropriate retirement savings, or failing that, the steps to get on track.
  • The right to a well diversified, quality portfolio appropriate for the participant, based on risk tolerance, retirement time horizon, and individual financial circumstances.
  • The right to automatic services such as auto-enrollment, auto-contribution increases and auto-portfolio allocation designed to meet the individual participant’s retirement savings and investing needs.
  • The right to know their portfolio’s investment performance relative to the appropriate benchmark(s).
  • The right to access low-fee, unbiased professional investment advice from an advisor who serves as a co-fiduciary to the participant.
  • The right to know all fees charged either directly to their account or charged indirectly through the expense ratios of the investments in the portfolio. All explanations should be in clear, concise language, including information about potential conflicts of interest of the organizations handling or selling.

Christian Echavarria, Founder and SVP of Invesmart, said in the release, “We’re hopeful sponsors of retirement plans and the Retirement Industry in general will embrace our Bill of Rights and use it as part of a growing commitment to improving the retirement security of America’s workers.”

Compliance September 19, 2005

ESOP Trustee Secretly Takes Over Company

September 19, 2005 (PLANSPONSOR.com) - The US District Court for the Western District of Tennessee found that an Employee Stock Ownership Plan (ESOP) trustee breached his fiduciary duties under ERISA when he purchased all of the ESOP's stock and did not disclose his purchase.
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According to BNA, Lawrence Scott was president of Memphis Equipment Co. (MEC) when, as the court said, he “orchestrated” a takeover of the company by getting a $2.3 million loan to purchase all of the company’s stock, which was held in the ESOP.  

The purchase occurred in January of 1999 and was disclosed in the ESOP’s annual report to the Department of Labor in August of 1999.   The court found that the purchase was not disclosed in the summary annual reports given to ESOP participants, according to BNA.

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Two other plan trustees, Max May and Billy Thompson, learned of the stock sale in late 2002, and sued Scott for improperly acting without the approval of MEC’s board of directors, breaching his fiduciary duties as a director and officer of the company, and wrongfully converting company funds.   BNA reports that, according to the court opinion, May and Thompson also alleged that Scott engaged in a prohibited transaction, breached his fiduciary duties, and failed to properly disclose information regarding the ESOP to plan participants.

In November of 2004, the district court rescinded Scott’s stock purchase.

In the recent opinion, the court also said that Scott caused losses to the plan when he used company assets for his own personal use.   BNA reports that t he court ordered Scott to repay $627,924 to MEC, and $455,721 of that amount constituted losses to the ESOP that resulted from Scott’s failure to disclose the transaction. In addition, the court agreed with May and Thompson that Scott should be required to forfeit his own personal interest in the ESOP as a way of repaying the $455,721 loss incurred by the ESOP.

The case is May v. Scott, W.D. Tenn., No. 03-2112 M1/P, 8/31/05.

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