Cleveland-based paint company sought tax breaks at expense of worker benefit plan

The U.S. Department of Labor has reached a settlement with the Cleveland-based Sherwin-Williams Co. that will provide $80 million to current and past participants of its Employee Stock Purchase and Savings Plan. The agreement is the result of an investigation by the department's Employee Benefits Security Administration into whether Sherwin-Williams, seeking to take advantage of tax breaks, improperly managed the plan in violation of the Employee Retirement Income Security Act. The settlement also requires Illinois-based GreatBanc Trust Co. to undergo an audit of its pension plan activities.

"Those who manage retirement plan assets are in a special position of trust and are required by law to always put the interests of plan participants ahead of anything else. That did not happen in this situation," said acting Secretary of Labor Seth D. Harris. "This agreement rightfully restores money to the workers who've played by the rules, done the right thing and worked hard to save for a secure retirement."

Said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi, "When fiduciaries expend retirement plan assets, they have to act with undivided loyalty to the plan participants and make sure that the plan receives full value for its money. The fiduciaries' job is to manage plan investments to provide a secure retirement, not to help the plan sponsor secure tax breaks that are wholly disproportionate to the benefits actually provided to retirees."

The department's investigation focused on two transactions, one in 2003 and one in 2006, in which Sherwin-Williams and GreatBanc caused the plan to purchase specially designed stock issued by Sherwin-Williams solely for the purpose of the transactions. The investigation also looked at whether Sherwin-Williams had forwarded employee salary deferrals appropriately and promptly to their individual plan accounts.

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Source: DOL

This information is intended to be educational and should not be considered legal advice on any specific matter.