Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
SunTrust Banks Inc. agreed to pay $4.75 million to settle allegations that it imprudently offered company stock as an investment option in its 401(k) plan.
If approved, the proposed settlement would end a 10-year lawsuit accusing SunTrust of breaching its fiduciary duties under the Employee Retirement Income Security Act, when plan participants lost hundreds of millions of dollars as the market price of SunTrust stock fell 73 percent between May 2007 and October 2009.
The proposed deal would also provide plan participants with certain nonmonetary relief, including quicker vesting on matching contributions and a guarantee that the vesting schedule won’t change to a less generous one for a period of at least three years. SunTrust also agreed to fund matching contributions in cash and enhance training for its fiduciary committee, according to an unopposed motion for settlement filed March 9 in federal court in Georgia.
The deal comes almost three years after the court partially dismissed some of the participants’ claims, but allowed them to proceed with their claim that SunTrust violated ERISA by allowing the plan to invest in company stock when SunTrust’s market price was “artificially inflated” due to material nondisclosed information about its weakened financial position.
In 2016, the court granted class status to thousands of participants in SunTrust’s 401(k) plan.
The settlement is a small victory for workers who have been challenging losses in retirement savings following drops in company stock price. These challenges have seen almost no success since 2014, when a U.S. Supreme Court decision made it harder to bring fiduciary breach claims under ERISA. Since then, a growing list of companies and their executives have defeated stock-drop lawsuits, including RadioShack Corp., WellsFargo, Target Corp., Cliffs Natural Resources Inc., Reliance Trust Co., Lehman Brothers Holdings Inc., State Street Bank & Trust Co., Citigroup, Whole Foods Corp., JPMorgan Chase & Co., L-3 Communications, and BP Plc.
The parties were assisted in the settlement negotiations by Robert A. Meyer, a mediator who’s negotiated ERISA settlements totaling more than $400 million in the past 10 years.
Kessler Topaz Metlzer & Check LLP, Douglas E. Hart, Stull Stull & Brody, Statman Harris & Eyrich LLC, Dyer & Berens LLP, Squitieri & Fearon LLP, Salpeter Gitkin LLP, and Holzer & Holzer LLC represent the participants. King & Spalding LLP, and McGriff Siebels & Williams LLC represent SunTrust.
The case is In Re SunTrust Banks, Inc. ERISA Litigation, N.D. Ga., No. 1:08-cv-03384-RWS, unopposed motion for settlement 3/9/18.
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