US LABOR DEPARTMENT IN $80M SETTLEMENT WITH SHERWIN-WILLIAMS

(The following is a reformatted version of a press release
issued by The U.S. Department of Labor and received via
electronic mail. The release was confirmed by the sender.) 
Feb. 21, 2013 
US Labor Department obtains $80 million for participants in
Sherwin-Williams Employee Stock Purchase and Savings Plan 
Cleveland-based paint company sought tax breaks at expense of
worker benefit plan 
WASHINGTON - 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. 
After conducting its investigation, the department concluded
that, as a result of Sherwin-Williams’ and GreatBanc’s
violations of their fiduciary duties and the design of the
transactions, the stock purchases did not provide benefits to
the plan and its participants commensurate with the amount the
plan paid for the stock, the transactions were not primarily for
the purpose of providing benefits to plan participants, the
transactions did not promote employee ownership of Sherwin-Williams and, at times, employee salary deferrals were not
appropriately paid to the plan. As a result, the department
concluded, Sherwin-Williams and GreatBanc were responsible and
liable for violations of ERISA. 
The department found that Sherwin-Williams’ purpose in the
transactions was to take advantage of substantial tax benefits
designed to reward companies that provide their workers with
significant stock ownership while, at the same time, ensuring
that its employees did not actually receive stock or retirement
benefits in amounts close to what the plan spent on the
transactions or that the company claimed on its government
filings. In October 2011, Sherwin-Williams reached a settlement
with the Internal Revenue Service in connection with the
transactions for excise tax and penalty claims. The IRS
settlement did not address violations of fiduciary duty under
ERISA or resolve the department’s concerns relating to Sherwin-Williams’ use of employee salary deferrals. 
The settlement will result in payments totaling $80 million to
current and former plan participants as well as to their
beneficiaries. In addition, GreatBanc will audit its engagements
involving plan investments in employer stock and submit a full
report of that audit to the department. 
As of Dec. 31, 2011, the date of the most recent Form 5500
filing, the plan had participants of 34,591 and assets of
$2,496,931,983. 
The settlement resulted from a comprehensive investigation
conducted by EBSA’s Cincinnati Regional Office with assistance
from the Plan Benefits Security Division of the department’s
Office of the Solicitor of Labor.
Workers participating in employer-sponsored health and
retirement benefit plans who feel that they have been denied a
benefit inappropriately or have questions about benefits laws
can contact an EBSA benefits advisor by visiting
http://www.askebsa.dol.gov or calling 866-444-EBSA (3272). 
(bjh) NY 
#<873920.660640.3.4.1.0.76>#
 
 
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