Settlements Announced in ERISA Lawsuits

Seattle, WAPeople who participate in employee stock options plans, employee savings plans or other employee benefit plans might not think twice about trusting that their company will do right by them. Unfortunately, that is not always the case. There are situations where companies violate ERISA (Employee Retirement Income Security Act) leaving it up to employees to protect not only their rights but also their finances.

Bank of America Corp, which now owns Countrywide Financial Corp., has settled a lawsuit filed by Countrywide employees who claim the company violated ERISA laws. The plaintiffs alleged that Countrywide misled them about its financial situation and caused the value of their retirement plan to decline. The settlement will see Bank of America pay $55 million to settle the claims.

A spokesperson for Bank of America said the company has admitted no wrongdoing, but is settling the lawsuit to avoid the cost of litigation.

Meanwhile, a proposed settlement in a class-action lawsuit alleging Wal-Mart and other defendants breached their fiduciary duties to participants in the company's 401(k) Plan and Profit Sharing Plan will see Wal-Mart pay $5 million to the plaintiffs. The lawsuit claimed Wal-Mart failed to make promised employer contributions to participants who were involved in the company's profit sharing and 401(k) plan.

According to the lawsuit, Wal-Mart violated ERISA laws by not making contributions to employee benefit plans as promised. The lawsuit included hourly employees who were participants in or beneficiaries of the plans between February 1, 1997 and May 26, 2009.

An article at planadviser.com (August 17, 2009) noted that Wal-Mart has denied any wrongdoing in the case but has agreed to the settlement to avoid the expense of litigation.

ERISA is a federal law that regulates benefit plans for private industry. Employers are not required by ERISA to establish retirement and health benefit plans, however, those employers that do establish such plans are then regulated by the minimum standards set by ERISA. ERISA applies to retirement plans, health benefit plans and other welfare benefit plans, such as disability plans.

Fiduciaries, those people responsible for employee benefit plans, have a duty to act in the best interests of their plan's participants. That means putting the interests of the participants ahead of the company's interests and making decisions that are prudent for participants. Failure to do so can be costly.