Merrill Lynch settles with DOL over ERISA violations

Merrill Lynch, Pierce, Fenner & Smith Inc. has settled allegations by the U.S. Department of Labor that the company and one of its employees violated the Employee Retirement Income Security Act by failing to prevent the fiduciaries of two Alabama pension plans from engaging in prohibited transactions.

As part of the settlement, Merrill Lynch must restore $170,854 to the plans of Amtren Corp. and Otorhinolaryngology Associates PC  and provide additional training to its investment advisors serving as employee benefit plan fiduciaries.

The Department of Labor’s Employee Benefits Security Administration alleged that fiduciaries of the two Alabama-based companies’ profit-sharing pension plans made improper loans. Gilbert Meadows III, an investment advisor at Merrill Lynch’s Montgomery branch office, provided advisory services to both plans. EBSA asserted that Meadows knew the loans were imprudent and considered prohibited transactions under ERISA but failed to take reasonable efforts to remedy these breaches of duty by his co-fiduciaries.

“Financial advisors to pension plans have a fiduciary responsibility to act solely in the best interests of plan participants,” said Isabel Colon, EBSA’s regional director in Atlanta. “We are pleased that Merrill Lynch recognizes that its advisers have an obligation to fully meet the standards set by ERISA.”

Merrill Lynch has restored $56,599 to the Otorhinolaryngology Associates plan, and also has agreed to restore $114,255 to the Amtren plan, once an independent fiduciary is appointed at Merrill Lynch’s expense to administer the plan. Additionally, Merrill Lynch will issue a written notice and provide training regarding the fiduciary and co-fiduciary obligations imposed by ERISA to all of its financial advisors who are acknowledged fiduciaries under the company’s Personal Investment Advisory program.

Merrill Lynch will place Meadows under a heightened supervision plan for two years, and he will be required to complete additional professional education before being allowed to serve as a financial advisor or other fiduciary to any ERISA-covered employee benefit plan. The company also will conduct a self-audit of all other ERISA-covered employee benefit plans among its clients for which Meadows is or was a financial advisor. Finally, the company will conduct quarterly reviews of Meadows’ performance with respect to ERISA-governed plans for a period of two years.


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