WASHINGTON -- The Department of Labor has agreed to a $3.6 million settlement of three related lawsuits with trustees of three New York non-contributory multiemployer pension funds.
Trustees Sam Marchio, Gerald Spiridilozzi, Carmen Nicotera, Richard Alexander, Jack Endryck and Tony Korrie agreed to repay a total of $930,000 to the Laborers Local 35 pension fund, Utica, N.Y. At the same time, trustees Carl Spatol, Edward Morgan, Richard Buck and Harold McElwain agreed to repay $960,000 total to the Carpenters Local 120 pension fund, Utica, N.Y.; and trustees John Agati, Sam Agati, Robert Ashley, Lanny Miller, Fred Rexford and Hugh Schickel agreed to repay a total of $1.1 million to the Laborers Local 322 pension fund, Massena, N.Y.
Additionally, the trustees of the three pension funds also agreed to pay $600,000 in fines to the Labor Department for violating federal pension law, and to give full discretion to the funds' investment managers to manage all of the assets.
The department's lawsuits alleged the trustees violated their fiduciary duties when they made their pension plans buy a class of collateralized mortgage obligations and real estate mortgage investment conduit bonds, generally known as Z-bonds. Trustees of all three plans used the same broker-dealer to make the purchases. By the end of 1994, each plan held a large amount of these securities, which the plans eventually sold at a significant loss.
The lawsuits alleged the purchases were imprudent because the trustees did not understand the investments and the risks of purchasing them, and did not monitor these investments. The lawsuits also claimed the trustees did not properly investigate the bonds, or consider how the bonds would fit with the plans' funding objectives.
Senators urged to endorse Leahy proposal
WASHINGTON -- Sen. Patrick J. Leahy, D-Vt., sent a letter to fellow senators asking them to sign on to cash balance pension plan legislation he co-sponsored earlier. The legislation, introduced by Sen. Tom Harkin, D-Iowa, would require companies to continue building up benefits for all employees when they convert to hybrids from traditional plans. Because cash balance plans build up benefits evenly over a career, older, longer-service employees can lose out when their companies make the conversion.
Rep. Sanders to introduce bill on cash balance plans
WASHINGTON -- Rep. Bernie Sanders, I-Vt., announced plans to introduce legislation penalizing companies that convert to cash balance plans without giving workers the choice of staying in their traditional pension plans. Otherwise, the conversion would be treated as a termination of the old plan and a reversion of assets would occur. The legislation, co-sponsored by Rep. Maurice Hinchey, D-N.Y., also would impose a 50% excise tax on any pension surpluses considered to be reverted.
The bill also would require companies to give employees 45 days' notice of any proposed pension plan changes that could cut their benefits, in a form allowing them to compare their benefits under the old and new plans.
Moreover, the proposal directs the Treasury secretary to enforce all existing age discrimination provisions relating to pension plans; and it prevents companies from stopping accruals for older workers when companies make changes in their pension plans.
Age discrimination question probed in plan conversions
WASHINGTON -- The Equal Employment Opportunity Commission is forming a national team of experts to step up efforts to investigate possible age discrimination in cash balance conversions. The team will include actuaries, lawyers and others within and outside the EEOC, said Ida Castro, EEOC chairwoman, in a statement.
"Whether or not cash balance pension plans discriminate against employees covered by the Age Discrimination in Employment Act is a question that I am determined to explore fully," Ms. Castro said.
At the same time, the American Association of Retired Persons is asking regulators to review cash balance pension plans for any violations of age discrimination law, and to give employers guidance to ensure cash balance plans comply with the law. In a letter to Treasury Secretary Lawrence H. Summers, Labor Secretary Alexis M. Herman, IRS Commissioner Charles O. Rossotti and Ms. Castro, AARP Executive Director Horace B. Deets expressed alarm about the number of age discrimination issues that arise when employers convert traditional pension plans to the hybrid plans.
Subcommittee chair plans hearings on pension law
WASHINGTON -- Rep. John Boehner, R-Ohio, chairman of the House Employer-Employee Relations Subcommittee, plans to commemorate the 25th anniversary of the Employee Retirement Income Security Act by holding hearings this autumn on how the law regulates the management and investment of the nation's private pension system.
In a statement, Mr. Boehner said the subcommittee's goal is "not to tinker around the edges, but to create the most efficient and effective regulatory system we can" to enable pension fund participants to get the highest returns on their investments while protecting them from mismanagement, fraud and self-dealing.
