The drugstore chain said the agreement would maintain the level of plan benefits at a $3.3-million cost to the company after insurance payments, according to a news report in the Harrisburg Patriot News.
Rite Aid said it has been talking with an independent trustee hired by the company and lawyers in a related pension lawsuit against the company, and a “preliminary understanding” has been reached to settle all claims. However, Rite Aid said various non-monetary terms and conditions still need to be resolved.
Any agreement would require approval of the US Department of Labor (DoL) and the US Eastern District Court in Philadelphia, where the lawsuit was filed.
Word of a settlement comes as the DoL continues its probe of Rite Aid’s benefit plans, including its 401(k) that allowed workers to buy Rite Aid stock in the late 1990s when questionable financial activities were uncovered. Company stock purchases stopped in October 1999 after the company’s former chairman and chief executive were ousted.
Rite Aid stock was trading as high as $50 a share at the beginning of 1999. It closed yesterday at $3.18.
Lawsuit Challenges K Plan Operation
The federal court lawsuit alleges that Rite Aid breached its fiduciary responsibility by allowing company stock as a 401(k) plan option. The suit claims the plan’s assets would be worth more if the money had been invested in other securities.
Rite Aid hired the trustee to represent the interests of
the company’s benefit plans.
The 401(k) plan and participants held about 3.9 million shares of Rite Aid stock at the end of 1999, the suit says.
Finally, the SEC and the US attorney’s office in Harrisburg, Pennsylvania are conducting civil and criminal investigations into Rite Aid’s accounting practices in the late 1990s that resulted in restatements of more than $1.6 billion in earnings.
Rite Aid spent $17.5 million in the most recent fiscal year for various costs associated with the ongoing investigations into activities of former managers. In fiscal 2001, completed early last year, it spent $82.1 million, much of that related to the financial restatements.
For the current year, Rite Aid expects to spend $10 million to $15 million related to the investigations.