Compliance January 2, 2020

Wilmington Trust Agrees to Settle ESOP Lawsuit

It has agreed to pay $5 million into a settlement fund.

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Wilmington Trust is agreeing to settle a lawsuit alleging the firm caused and engaged in prohibited transactions under the Employee Retirement Income Security Act (ERISA) related to a sale of ISCO Industries’ stock to participants in its employee stock ownership plan (ESOP).

According to the original complaint, on December 20, 2012, ISCO and/or its prior owner(s) sold 4 million shares of common stock in the company to the ESOP in exchange for a 25-year note of $98 million, accruing 2.4% annual interest. As of December 31, 2012, the ISCO shares purchased by the ESOP were revalued by an independent appraiser at $39 million—a decrease of more than 60%.

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The motion for preliminary approval of the settlement agreement says, “Wilmington Trust denies these allegations; denies any wrongdoing or liability; and has vigorously defended itself in this action. Wilmington Trust does not admit wrongdoing of any kind regarding the ESOP Transaction or this action.”

Nevertheless, Wilmington Trust has agreed to pay $5 million into a settlement fund. The court document argues that “a settlement of $5,000,000—approximately $12,000 per participant before fees and other costs are applied—is a good result for the Class.” However, it also says the funds remaining after deduction from the settlement amount for taxes (or reserves to pay taxes), settlement administration fees, court-approved attorneys’ fees or expenses, and any service awards to the class representatives are what will be distributed to the class members.

The motion cites as one reason for settlement “probable costs, in both time and money, of continued litigation.” The case has continued since a recommended decision was made in August 2017 that favored Wilmington Trust. Chief U.S. Magistrate Judge Mary Pat Thynge of the U.S. District Court for the District of Delaware found that the plaintiffs lack standing for subject matter jurisdiction because they did not allege an economic injury. Thynge’s recommendation allowed for the parties to serve and file specific written objections within 14 days after being given a copy of her report. A review of the docket for the case shows those were filed, as well as many other motions over the more than two years since.

A trial for the case was set for May 11, 2020.

Benefits January 2, 2020

Will There Be a New Focus on Social Security in 2020?

While awaiting action from the government to shore up Social Security, plan sponsors can do their part by educating employees.

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Reliability for Social Security has diminished in the past decade. Some people believe the benefit will be unavailable by the time retirement hits, while others think monthly checks will see a hefty cut.

The rumors shouldn’t be measured too much, says William Meyer, CEO of Social Security Solutions. In fact, he believes Social Security reform will likely be a priority in the new year, especially due to the upcoming presidential election. “Given the underfunding of the current system, everyone knows that a change is needed,” he adds. “We are starting to hear proposals from future presidential candidates and I’m hopeful that Social Security reform will be a priority in the next presidential term.”

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Increasing awareness when it comes to claiming strategies is another trend Meyer foresees for 2020. He reasons that participants must evaluate options and understand how to maximize their own benefit claims. “The coordination of Social Security with your 401(k) will be the biggest financial decision Americans will make,” he says. “Those that take time to find a claiming strategy to maximize their benefits will be able to make their retirement savings last longer.”

Plan sponsors and their advisers can help employees with their understanding of Social Security. Understanding behavioral biases is also key to helping employees make the right decisions. In 2019, PLANSPONSOR spoke with several sources to offer actionable insights to plan sponsors.

Social Security: The Facts vs. Fiction
Educate older workers on Social Security and other such benefits, to help stretch their savings in retirement, experts say. Read more.

Social Security Education a Must-Have for Retirement Plan Participants
General education is helpful, but getting personal will help employees establish a plan for income in retirement. Read more.

Behavioral Insights About Retirement Income Decisions
A professor at the UCLA Anderson School of Management discussed biases that must be considered when helping people make retirement income decisions. Read more.

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