The U.S. Department of Labor (DOL) has entered into an agreement with the fiduciaries of the Cactus Feeders Inc. Employee Stock Ownership Plan (ESOP), who will repay $5.45 million in plan losses to the ESOP.
According to a DOL announcement detailing the settlement, the agreement resolves a March 10, 2016, civil suit alleging fiduciaries failed to fulfill their obligations under the Employee Retirement Income Security Act (ERISA) of 1974. The allegations stem from a December 2010 stock transaction that resulted in the ESOP overpaying for the outstanding shares of the company.
Lubbock National Bank, the ESOP’s trustee, has also agreed to take steps that will ensure it fulfills its fiduciary obligations in the future, DOL says. These include “agreeing to an extensive list of actions and conduct that prudent fiduciaries undertake when evaluating whether, for what value, and under what conditions an ESOP should purchase employer stock,” according to the DOL announcement.
Deborah Perry, Employee Benefits Security Administration (EBSA) regional director in Dallas, warns that investigators in her region and elsewhere will remain focused on questionable ESOP transactions, adding that “DOL will take all actions necessary to ensure that fiduciaries live up to their legal obligations.”
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