The US Department of Labor (DoL) and Rite Aid had been investigating practices of the company’s primary 401(k) plan, which allowed Rite Aid stock purchases until October 1999, (see Rite Aid Says Pension Claims Settled ), according to a Harrisburg (Pennsylvania) Patriot-News story.
Rite Aid will put $4 million into a settlement fund, and its insurance companies will contribute an additional $5.5 million, according to the company’s latest quarterly 10-Q statement filed with the US Securities and Exchange Commission (SEC), the Patriot-News said. Another party, Prudential Securities Inc., agreed to contribute $1.25 million.
The company also has agreed to maintain the current benefits level in its principal 401(k) retirement plan through the end of 2006, the newspaper reported. Rite Aid matches 100% of the first 3% of salary contributed to the plan by employees, and 50% of the next 2% of salary.
The settlement included attorneys involved in a separate participant lawsuit against the company over the 401(k) plan’s company stock investments and with the company’s independent trustee. The trustee was appointed by new management to represent the interests of the company’s retirement plans . Rite Aid said the DoL has agreed to close its investigation after the court approves the settlement. A fairness hearing on the settlement proposal has been scheduled for March 7 before US District Judge Stewart Dalzell in Philadelphia.
The government contends that Rite Aid’s former management inflated earnings by about $1.6 billion in the late 1990s. Three former executives have been indicted and face multiple charges of accounting fraud.
Rite Aid stock was trading at $25 a share in 1997 and ballooned to $50 a share in early 1999 before the corporate finances unraveled. The stock closed Thursday at $2.68 a share.