iJoin Solutions, a developer of mobile enrollment and analytics solutions for the financial services industry, has partnered
with Alliance Benefit Group (ABG) to deliver advisory tools and solutions
within the ABG network.
According to the firms, iJoin’s technologies will “enhance and
streamline the enrollment experience for plan participants while supporting
financial advisers with powerful and accessible analytics tools.” iJoin’s
mobile friendly and cross-platform capabilities, the firms add, “make it easy
for retirement and investment professionals to engage plan participants and
sponsors.”
Don Mackanos, president of ABG, says iJoin is the right
partner for ABG because “the plan participant benefits by a better enrollment
experience and the opportunity to create a more successful savings path,” while
the adviser “benefits by engaging with both participants and sponsors in a more
precise and personal way. And ABG wins by enhancing the overall value
proposition to the plan sponsor.”
Mark Noble, partner at iJoin, says the firm is fully
committed to the retirement planning industry, “with creative and cost-effective tools that positively impact the way participants, sponsors and advisers
experience their retirement plans.”
Participants in an ESOP that purchased shares with a loan
from the sponsoring employer made allegations that were not backed by evidence,
a court found.
A federal judge dismissed a lawsuit brought by participants
in the Personal-Touch Home Care Employee Stock Ownership Plan (ESOP) for
failure to state a claim.
U.S. District Judge James B. Zagel of the U.S. District
Court for the Northern District of Illinois rejected the participants’ first
claim that GreatBanc trust, in its role as fiduciary, breached its fiduciary
duty under the Employee Retirement Income Security Act (ERISA) by arranging for
the ESOP to purchase Personal-Touch shares above value, financed with an unreasonable
loan rate. The participants said the ESOP paid too much for the Personal-Touch
shares that it purchased because the price went down after the transaction, and
it borrowed money to fund this purchase at a rate higher than the market
rate—without providing any supporting detail.
Citing Bell Atlantic Corp. v. Twombly, Zagel
found that without additional facts, the participants’ allegations are “merely
consistent with” a breach, and they fail to nudge their claim “across the line
from conceivable to plausible.” He found that the value of Personal-Touch stock
years after the transaction does not speak directly to GreatBanc’s duty “under
the circumstances then prevailing” at the time of the purchase. It is not
necessarily indicative of the fair market value before the purchase.
In addition, citing the Supreme Court decision in Fifth Third Bancorp
v. Dudenhoeffer, Zagel said that “absent an allegation of special
circumstances regarding, for example, a specific risk a fiduciary failed to
properly assess, any fiduciary would be liable for at least discovery costs
when the value of an asset declines. Such a circumstance cannot be the
intention of Rule 8(a), or Dudenhoeffer. An allegation of a special
circumstance is missing in this case—in fact, we know absolutely nothing about
the financial situation of Personal-Touch.”
Regarding the participants’ argument that the loan rate was
higher than market rate, Zagel again found they had no evidence to support the
claim. A reasonable rate is determined from all relevant factors, he said,
including the amount and duration of the loan, the security involved, the
credit standing of the ESOP, and the interest rate prevailing for comparable
loans. While the participants offered up the interest rate for comparable
loans, Zagel determined this only raises a possibility that the rate was
unreasonable, while a dearth of other facts makes it impossible to draw a
plausible inference that the mismatched rates were due to a breach of fiduciary
duty.
NEXT: Did prohibited transactions occur?
Zagel also rejected the participants’ other claim that
GreatBanc caused the ESOP to engage in prohibited transactions under ERISA when
the ESOP both bought stock and received a loan from a “party in interest.”
Personal-Touch is a party in interest because it is an employer whose employees
are covered by the ESOP. Zagel noted that ERISA statute categorically prohibits
almost any transaction between an ESOP and a party in interest, but then
provides a long list of exemptions.
A purchase of shares by an ESOP from a party in interest is
exempted from being a prohibited transaction if the shares are purchased for
“adequate consideration,” defined, for a security with no generally recognized
market, as “the fair market value of the asset as determined in good faith by
the trustee or named fiduciary pursuant to the terms of the plan and in
accordance with regulations promulgated by the Secretary.” According to Zagel,
under 7th U.S. Circuit Court of Appeals case law, this provision creates a
two-part test that the ESOP paid no more than fair market value, and the fair
market value was determined in good faith. As he found earlier in his opinion,
the participants did not successfully plead that the ESOP paid more than fair
market value for the Personal-Touch shares.
Zagel noted that an extension of credit from a party in
interest to an ESOP is a prohibited transaction unless the loan is primarily
for the benefit of the plan participants and “such loan is at an interest rate
which is not in excess of a reasonable rate.” Again, participants did not
successfully plead that the loan interest rate was unreasonable.
The plaintiffs in the case were participants in the ESOP
when it purchased an unknown percentage of Personal-Touch shares for $60
million on December 9, 2010. The transaction was funded by a $60 million loan
from Personal-Touch (and/or its principal shareholders) to the ESOP, payable
over 30 years with 6.25% annual interest.
According to the participants, the value of ESOP’s
Personal-Touch shares was only 78% of the purchase price about one month after
the transaction, 50% by the end of 2011, and 45% by the end of 2013. They also
allege that the market rate for a loan similar to the one extended to the ESOP
is 4.25%, significantly lower than the rate the ESOP received.
The opinion in Allen v. GreatBanc Trust Co. is here.