Key Takeaways
- • The U.S. Department of Labor's Employee Benefits Security Administration found that the International Association of Machinists' National Pension Fund (IAM National Pension Fund) violated ERISA and breached fiduciary duties, according to the settlement terms reported by the publisher.
- • The settlement requires defendants to repay $200,000 to the fund and pay $40,000 in civil money penalties.
- • The violations cited include disloyal or imprudent selection of service providers, ignoring plan document procedures, creating conflicts of interest, accepting gratuities from service providers, and lavish spending of fund assets on trips, parties, and accommodations.
- • Trustees must adopt a new manager and consultant selection policy within 30 days, run a new general investment consultant search using an independent search consultant, and bar one person from serving as both investment consultant and investment manager.
- • The fund must retain records on the hiring or firing of consultants and managers for six years.
Summary
An investigation by the U.S. Department of Labor's Employee Benefits Security Administration found that the International Association of Machinists' National Pension Fund violated the Employee Retirement Income Security Act (ERISA) and breached its fiduciary duties, according to the publisher's report. The findings cover five categories of conduct: failing to select fund service providers, including consultants and investment managers, loyally and prudently; repeatedly ignoring required procedures in the fund's governing plan documents; creating conflicts of interest; unlawfully soliciting and accepting gratuities from plan service providers; and spending, or permitting others to spend, fund assets lavishly on unnecessary trips, parties, and extravagant food, wine, and accommodations.
A settlement agreement resolving the matter ordered the defendants to repay $200,000 to the fund and pay $40,000 in civil money penalties. Beyond the financial restitution, the order requires the plan trustees to take remedial governance steps designed to prevent future ERISA violations. Within 30 days of entry of the order, trustees must adopt a new manager and consultant selection policy mandating a three-part search process for selecting an investment consultant or investment manager.
The order also requires the trustees to conduct a new search for a general investment consultant, retaining an independent search consultant to run a comprehensive and objective request for proposal process. In addition, the fund's code of conduct and ethics must be amended to prohibit the same person from serving as both investment consultant and investment manager. The fund's record retention policy must also be amended to hold records relating to the hiring or firing of any investment consultant or manager for six years.
The settlement follows a civil complaint the DOL filed on January 24, 2016, against the IAM National Pension Fund and its board of trustees, which alleged improper procedures in the selection of certain service providers. The IAM National Pension Fund is a defined benefit plan that provides eligible participants with a monthly lifetime benefit. The case was also reported in related coverage as a settlement of the DOL's provider selection lawsuit.
A settlement agreement resolving the matter ordered the defendants to repay $200,000 to the fund and pay $40,000 in civil money penalties. Beyond the financial restitution, the order requires the plan trustees to take remedial governance steps designed to prevent future ERISA violations. Within 30 days of entry of the order, trustees must adopt a new manager and consultant selection policy mandating a three-part search process for selecting an investment consultant or investment manager.
The order also requires the trustees to conduct a new search for a general investment consultant, retaining an independent search consultant to run a comprehensive and objective request for proposal process. In addition, the fund's code of conduct and ethics must be amended to prohibit the same person from serving as both investment consultant and investment manager. The fund's record retention policy must also be amended to hold records relating to the hiring or firing of any investment consultant or manager for six years.
The settlement follows a civil complaint the DOL filed on January 24, 2016, against the IAM National Pension Fund and its board of trustees, which alleged improper procedures in the selection of certain service providers. The IAM National Pension Fund is a defined benefit plan that provides eligible participants with a monthly lifetime benefit. The case was also reported in related coverage as a settlement of the DOL's provider selection lawsuit.
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