Equifax Workers Could Take Hit to Retirement Savings

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Around 143 million Equifax Inc. customers got bad news Sept. 7 when the company announced a massive data breach involving customers’ Social Security and credit card numbers. Could the news be just as bad for Equifax’s employees, who own a combined $80 million in company stock in their 401(k) plan?

Equifax announced the breach after Sept. 7’s closing bell, when its stock price stood at close to $143 per share. When trading ended Sept. 8, the price had dropped nearly 14 percent to about $123. That drop corresponds to an $11 million loss in retirement savings for the company’s workers.

Equifax stock was the second-largest investment in the company’s $664 million 401(k) plan as of December 2016, according to government filings. Since 2011, both the size of the 401(k) plan and the amount of plan assets invested in Equifax stock have roughly doubled.

Lessons From Target, JPMorgan

Despite these early losses, Equifax employees worried about their retirement savings can take comfort by looking to other companies that have weathered data breaches.

Target Corp. had about $2 billion in company stock in its retirement plan when it announced a data breach affecting 110 million people in late 2013. Three months later, Target’s stock price was off less than 5 percent. The company stock in Target’s 401(k) plan was up slightly by the end of 2014, according to government filings.

JPMorgan experienced something similar following its 2014 data breach, which involved about 83 million customer accounts. The company’s stock price increased in the three months after the breach was disclosed, and the company stock in JPMorgan’s 401(k) plan rose from $3.2 billion in late 2013 to nearly $3.4 billion by the end of 2015, government filings indicate.

Recent data breaches at Anthem Inc. and Home Depot followed similar patterns, according to a Bloomberg BNA analysis.

Legal Woes

Although workers with Equifax stock in their 401(k) accounts may be able to breathe easy, other Equifax employees might not be so lucky. Three senior executives, including chief financial officer John Gamble, sold a combined $1.8 million in Equifax stock three days after the company learned of the breach, but more than a month before the company announced it publicly. The company said the executives weren’t aware of the breach at the time of the sale.

Adding to Equifax’s legal troubles is a proposed class action by customers affected by the breach. The lawsuit was filed Sept. 7 in an Oregon federal court, hours after the breach was announced. And New York’s attorney general said Sept. 8 that he started an investigation into how and why the data breach occurred.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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