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Secretary of Labor Thomas E. Perez
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News Release

EBSA News Release: [02/21/2013]
Contact Name: Jason Surbey or Michael Trupo
Phone Number: (202) 693-4668 or x6588
Release Number: 13-0334-NAT

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).