Machinists’ Pension Fund Cited by U.S. DOL
An investigation by the U.S. Labor Department’s Employee Benefits Security Administration recently found that the International Association of Machinists’ National Pension Fund violated the Employee Retirement Income Security Act and breached their fiduciary duties by:
- Failing to select fund service providers loyally and prudently, including consultants and fund investment managers
- Ignoring required procedures included in the fund’s governing plan documents regularly
- Creating conflicts of interest for the fund
- Unlawfully soliciting and accepting gratuities from plan service providers
- Spending and permitting others to spend fund assets lavishly on unnecessary trips, parties and extravagant food, wine, and accommodations
A settlement agreement ordered the defendants to repay $200,000 to the fund and pay $40,000 in civil money penalties.
The order also requires the plan trustees to take the following actions to protect fund participants from future violations of the Employee Retirement Income Security Act:
- Within 30 days of entry of the order, adopt the new manager and consultant selection policy, which mandates that the plan trustees use a three-part search process for selecting an investment consultant or investment manager.
- Engage in a new search process for a new general investment consultant for the fund, and hire an independent search consultant to conduct a comprehensive and objective request for proposal process for this search.
- Amend the fund’s code of conduct and ethics to prohibit the same person from acting as both an investment consultant and investment manager for the fund.
- Amend the fund’s record retention policy to hold records relating to the hiring or firing of any investment consultant or manager for six years.
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