Data & Research February 7, 2012

Company Stock Holdings Decreased Since PPA

 

The share of plan assets in company stock fell seven percentage points for KSOPs because of the diversification provisions in the Pension Protection Act of 2006 (PPA2006).

 

Reported by

 

According to a report released by the Center for Retirement Research (CRR) at Boston College, most of the decline occurred in plans that had between 25% and 50% of plan assets in employer stock. In 2009, still two-thirds of KSOPs had more than 10% of assets in company stock, the statutory limit for defined benefit pension plans.  

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PPA2006 allowed participants in plans with employer stock who had at least three years of service to diversify their holdings (see IRS Extends Relief for Employer Stock Account Diversification). However, stand-alone ESOPs, those that do not allow employee elective deferrals or after-tax contributions, were exempt from this provision. The research found there was no change in holdings for stand-alone ESOPs.  

The research used detailed Form 5500 financial data for stand-alone ESOPs and those that allow employee elective deferrals or after-tax contributions, or KSOPs, from 2003 to 2005 (before) and 2007 to 2009 (after) the PPA.  

The report can be downloaded from http://crr.bc.edu/working_papers/the_pension_protection_act_of_2006_and_diversification_of_employer_stock_in_defined_contribution_plans.html.

 

Compliance February 7, 2012

DoL Sues Company for Failure to Remit Contributions

 

The U.S. Department of Labor (DoL) filed a lawsuit against Towson Rehabilitation Center LLC and CEO Howard Neels for failing to remit employees’ contributions to the company’s 401(k) plan. 

 

 

Reported by

The suit resulted from an investigation by the Washington District Office of the DoL’s Employee Benefits Security Administration (EBSA), which found that, since January 2006, the defendants have failed to remit employee contributions to the plan, remitted certain employee contributions late without interest and failed to segregate the plan’s assets from the general assets of the company.

“This case clearly demonstrates a breach of fiduciary duty,” said Norman Jackson, EBSA’s acting regional director in Philadelphia. “We will hold fiduciaries accountable when they fail to act in the best interest of plan participants.” 

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Filed in the U.S. District Court for the District of Maryland, the suit seeks to restore to the plan all losses, including interest and opportunity costs, as well as the cost of an independent fiduciary. The suit also seeks to permanently bar the defendants from serving in a fiduciary capacity to any employee benefit plan covered by ERISA, and appoint an independent fiduciary with plenary authority and control with respect to the management and administration of the plan.

The case is Solis v. Towson Rehabilitation Center LLC et al.
No: 1:12-cv-00117-JKB.

 

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