Data and Research September 3, 2015

Employees with Student Loan Debt Seek Workplace Help

They say they would value the assistance as much as health care benefits and 401(k)s.
Reported by

Nearly 80% percent of people carrying student loan debt would like their workplace to offer assistance with paying it down, iontuition, a member of the Ceannate companies, found in a survey of 1,000 individuals carrying such debt.  

Fifty-five percent said they would rather that the amount of money they are paying for health care benefits go towards their student loan debt instead, and 49% said they would rather have help with their student loans than be offered a 401(k).

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“Employers who rely on a college-educated workforce cannot ignore numbers like these,” says Balaji Rajan, chief executive officer of Ceannate. “Our survey shows that a majority of borrowers would greatly value an employee benefits package tailored to reducing and managing their student debt.”

Iontuition’s survey comes on the heels of a Bankrate.com survey that found 56% of Millennials with current or past student debt are delaying major life events, compared with 43% of older adults. The most common milestone they are postponing is buying a house, closely followed by saving for retirement and buying a car.

Compliance September 3, 2015

DOL Accuses ESOP Fiduciaries of Prohibited Transactions

A lawsuit says BAT Masonry was valued at $13 million less than what its ESOP paid for company stock.
Reported by

The Department of Labor (DOL) has filed a complaint alleging that fiduciaries of the BAT Masonry Co. Inc. Employee Stock Ownership Plan (ESOP) breached their duties of prudence and loyalty to the ESOP and engaged in prohibited transactions in connection with the ESOP’s purchase of the company stock and one trustee’s withdrawals of cash thereafter, in violation of the Employee Retirement Income Security Act (ERISA).

The complaint further alleges that fiduciaries effectively abandoned the plan and breached their fiduciary duties.

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According to the DOL, BAT Masonry Co. Inc., the sponsor and administrator of the plan, established the ESOP as of May 1, 2009. The trustees of the plan were Wayne B. Booth, Gregory Booth and Melvin Hinton. In July 2010, the ESOP purchased all the stock of the company from the Wayne Booth Revocable Trust, an entity controlled by Wayne Booth, for $1.6 million in cash and two promissory notes in the amount of $11.9 million, a total purchase price of $13.5 million.

The purchase price was based on a valuation of the company conducted by SMK, which the company had hired for that purpose. However, the DOL says SMK’s valuation of the company was flawed in several respects, resulting in the ESOP overpaying the Wayne Booth Revocable Trust for the company stock.

SMK failed to account for the deteriorating fundamentals of the company’s business and improperly treated $5.8 million that Wayne Booth had previously withdrawn from the company’s account, and which he never intended to repay, as an account receivable, among other errors. The trustees of the plan relied on SMK’s valuation, despite knowing the financial condition of the company was deteriorating.

In December 2010, the company hired another valuation firm, which valued the company at $163,590, more than $13 million less than what the ESOP had paid for company stock only months before.

In addition, Wayne Booth continued drawing cash out of the company after the ESOP transaction, even though he no longer held any ownership interest. These withdrawals totaled at least $1.25 million. The company treated these withdrawals as payments from the ESOP to Wayne Booth, even though Booth’s withdrawals bore no relationship to the terms of the ESOP note, and the ESOP never received company shares in return for Booth’s withdrawals.

BAT Masonry Co. went out of business in mid-2012, rendering the shares held by the ESOP valueless. At this time Gregory Booth and Hinton started their own company, M.H. Masonry. M.H. Masonry employs many of the same employees as the now-defunct BAT Masonry, purchased equipment owned by BAT at a significant discount, and is located at the same address as BAT.

The lawsuit seeks to require each of the fiduciary defendants jointly and severally to restore all losses caused to the plan as a result of their fiduciary breaches. It further seeks disgorgement of any and all unjust enrichment that certain fiduciaries received as a result of their fiduciary breaches.

The DOL’s complaint can be viewed here.

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