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Sherwin-Williams Plan Employees Awarded $80M
WASHINGTON -- The U.S. Department of Labor has reached a settlement with the Cleveland-based Sherwin-Williams Co. that will provide $80 million to current and past participants of its Employee Stock Purchase and Savings Plan. The agreement is the result of an investigation by the department’s Employee Benefits Security Administration.
The investigation focused on whether Sherwin-Williams, seeking to take advantage of tax breaks, improperly managed the plan in violation of the Employee Retirement Income Security Act (ERISA). The settlement also requires Illinois-based GreatBanc Trust Co. to undergo an audit of its pension plan activities.
The settlement will result in payments totaling $80 million to current and former plan participants as well as their beneficiaries. In addition, GreatBanc will audit its engagements involving plan investments in employer stock and submit a full report of that audit to the department. As of Dec. 31, 2011, the date of the most recent Form 5500 filing, the plan had 34,591 participants and assets of $2,496,931,983.
“Those who manage retirement plan assets are in a special position of trust and are required by law to always put the interests of plan participants ahead of anything else," said Seth D. Harris, acting secretary of labor. "That did not happen in this situation. This agreement rightfully restores money to the workers who’ve played by the rules, done the right thing and worked hard to save for a secure retirement.”
The Labor Department’s investigation focused on two transactions -- one in 2003, the other in 2006 -- when Sherwin-Williams and GreatBanc caused the plan to purchase specially designed stock issued by Sherwin-Williams solely for the purpose of the transactions. The investigation also looked at whether Sherwin-Williams had forwarded employee salary deferrals appropriately and promptly to their individual plan accounts.
After conducting its investigation, the department concluded that, as a result of Sherwin-Williams and GreatBanc’s violations of their fiduciary duties and the design of the transactions, the stock purchases did not provide benefits to the plan and its participants commensurate with the amount the plan paid for the stock, the transactions were not primarily for the purpose of providing benefits to plan participants, the transactions did not promote employee ownership of Sherwin-Williams and, at times, employee salary deferrals were not appropriately paid to the plan. As a result, the department concluded, Sherwin-Williams and GreatBanc were responsible and liable for violations of Erisa.
The Labor Department found that Sherwin-Williams’ purpose in the transactions was to take advantage of substantial tax benefits designed to reward companies that provide their workers with significant stock ownership while, at the same time, ensuring that its employees did not actually receive stock or retirement benefits in amounts close to what the plan spent on the transactions or that the company claimed on its government filings. In October 2011, Sherwin-Williams reached a settlement with the Internal Revenue Service in connection with the transactions for excise tax and penalty claims. The IRS settlement did not address violations of fiduciary duty under Erisa or resolve Labor’s concerns related to Sherwin-Williams’ use of employee salary deferrals.
Workers participating in employer-sponsored health and retirement benefit plans who feel that they have been denied a benefit inappropriately or have questions about benefits laws can contact an EBSA benefits adviser by calling 1 866 444 3272 or visiting http://www.askebsa.dol.gov.
SOURCE: U.S. Labor Department
Published by The Business Journal, Youngstown, Ohio.
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