The dispute is a historical remnant of a 1993 life-insurance program Sallie Mae instituted to insure the pension benefits for 105 of its highest paid workers. Prudential Life Insurance Co. administered the program, according to a Dow Jones report.
Key issue in the dispute is whether Sallie Mae is entitled to the Prudential stock for paying for the coverage or whether it belongs to the six executives since they were the object of the coverage.
The Prudential stock came about from the insurance company’s 2000 corporate reorganization to a stockholder-owned concern. As a result, the Prudential insurance policies on the executives in question were recipients of shares of the insurer’s public offering.
Dow Jones said Prudential has already turned over around 450,000 shares to Sallie Mae, but won’t produce any more until Sallie Mae gets affected employees’ written authorization. It has done so with 72 former and 27 current employees so far, according to Dow Jones.
Policies covering the six holdouts were converted into 32,731 shares of Prudential Financial Inc. stock worth slightly more than $1 million.
Sallie Mae has sued the six, seeking their permission for Prudential to turn over any remaining shares; the six executives are countersuing, claiming they deserve the stock.
The company has argued that the six executives have already received the bulk of their total pension benefits. Because most of the pension money has already been paid out, Sallie Mae claims the money from the stock should go into its coffers.
“Our position is that if we were to pay those benefits, it would exceed the benefits we promised to them,” Sallie Mae spokesman Jim Boyle told Dow Jones. “We think it’s a responsibility to our shareholders that we prevent overpayment of compensation to current and former employees.”
Sallie Mae recently changed its corporate name to USA Education Inc.