Investigations: Lost Pensions

Many workers across America today depend on company sponsored plans to provide them with income after their retirement.  But too often loyal employees of companies approach retirement only to find that their retirement plans are under-funded or have been wiped out entirely.  The Employee Retirement Income Security Act (ERISA) is a federal law which governs employer conduct with respect to retirement and benefit plans.  

In a developing trend, companies are finding ways to "game the system" to get rid of pension obligations or to raid the plans themselves.  ERISA not only prohibits certain transactions involving pension plans and their assets, but also identifies those individuals and entities responsible for holding employees’ pension funds in trust and permits plan participants to file suit against a plan sponsor for certain conduct resulting in lost pension funds.

ERISA requires employers to act sensibly, loyally, and with the highest regard for the interests of their employees when it comes to selecting plan investment options and investing plan assets.  There are a host of different types of employee benefit plans and the laws imposed by ERISA apply to all of these investment options. When employers violate the laws enforced by ERISA, employees can seek to hold their employers accountable for monies lost because of the employers' breach.

Some employers violate their financial responsibilities by steering employee plan money into their own company stock, often a risky prospect if the stock goes down in value or becomes overvalued.  In the event the company stock loses value, therefore lowering the value of the pension fund itself, some companies engage in risky and illegal accounting and business practices in an attempt to reverse or cover up the loss.  When in trouble, many companies and investors use the Bankruptcy Code to reduce financial liabilities, including dumping under-funded pension plans.  Under ERISA, employers are required to provide complete and accurate accounting information as well as other disclosures to its retirement plan participants. 

You have legal rights and options. Lewis Saul & Associates can help people who have lost retirement money due to mismanagement, misconduct or outright fraud.

The following are some of the types of benefit plans subject to ERISA:

• Profit sharing plans;
• 401(k) plans;
• Employee Stock Ownership Plans (“ESOPs”);
• Tax-deferred “403(b)” annuity plans;
• Simplified employee pensions (“SEPs”);
• Pension plans (defined benefit).

Responsible parties can be held liable for bad acts leading to pension losses.  Actionable conduct includes:

• Improper advice;
• Inadequate disclosure;
• Inappropriate selection of advisors or service providers;
• Imprudent investments;
• Insufficient investment diversity;
• Violation of duties imposed by ERISA;
• Negligence in plan administration;
• Conflicts of interest.

Employee benefit plan terminology:

ERISA - The Employee Retirement Income Security Act sets standards of conduct for the managers of retirement and employee benefit plans.

ESOP - An ERISA plan whose purpose is to invest primarily in “qualifying employer securities” or shares of stock in the employer sponsoring the plan. ESOPs serve the dual purpose of providing retirement benefits and as a “technique of corporate finance.”

401(k) Plan - An employee benefit account designed to provide benefits for the sponsor's employees.

Plan Fiduciary - A person who exercises any discretionary authority or control over the management of a plan or its assets, or has any discretionary authority in the administration of the plan.

Defined Benefit Plan - A plan that guarantees a certain return and must maintain sufficient funds to provide the promised benefits.

Defined Contribution Plan – A plan with rules governing the amounts allowed as plan contributions but with unrestricted benefit payment amounts.

The concept of pension plan funding is generally a simple one; however, problems can arise because of unreliable or unscrupulous managers and trustees.  If you believe that you, or someone you know, may have been a victim of pension plan abuse or misconduct, please call Lewis Saul & Associates toll-free at (888) 747-5342 or fill out our convenient online contact form and a member of our firm will contact you by the next business day for a free consultation.