SunTrust Banks has agreed to settle a long-running Employee Retirement Income Security Act (ERISA) lawsuit for $4.75 million.
According to the settlement agreement, the company denies “any fault, liability or wrongdoing.”
The case, originally filed in 2008, alleged that SunTrust Banks breached its fiduciary duty by keeping company stock as an investment option in its 401(k) plan after it was no longer prudent. The suit charged that the company said publicly it was tightening its underwriting standards for certain types of mortgages, but actually had substandard procedures in place that allowed it to grant loans to undeserving borrowers. The plaintiffs also alleged the company led investors to believe it had scoured its portfolio and found its loss exposure was “virtually zero” on loans known as “Alt A” transactions when that was untrue. The participants argued they lost money when the company’s share price dropped during the mortgage meltdown as part of the 2008 economic crisis.
Other terms of the settlement agreement include:
- All participants whose date of hire is on or before December 31, 2010, are 100% vested in matching contributions.
- Those hired on or after January 1, 2011, or who resume employment after that date and are not fully vested, shall be 100% vested in matching contributions the earlier of the date of completion of two years of vesting service, disability or death.
- SunTrust will not amend the vesting schedule to a less generous one for a period of three years from the date the settlement agreement is executed unless otherwise required by fiduciary obligations or changes in law.
- SunTrust currently funds matching contributions in the form of cash or cash equivalents—not shares of SunTrust stock—and agrees not to change this for a period of three years from the date the settlement agreement is executed.
- SunTrust, at its expense, will provide fiduciary training to the committee responsible for the plan on an annual basis for at least five years from the date the settlement agreement is executed.