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A federal tax investigation adds to Bank of America’s pension woes.
Stephen Taub, CFO.com | US
November 12, 2004
The Internal Revenue Service is auditing the 1998 and 1999 tax returns of Bank of America's pension and 401(k) plans.
The audit, which was revealed earlier this week in the bank’s quarterly filings with the Securities and Exchange Commission, includes a review of participants' voluntary transfers of 401(k) assets to the pension plan.
Last week, The Wall Street Journal reported that Bank of America employees launched a lawsuit alleging that part of their pension accounts were being used in an "arbitrage scheme" to enrich the bank at the employee’s expense.
The suit also asserts that officials at NationsBank, which merged with Bank of America to form the current corporate entity, encouraged employees to transfer $1.4 billion in 401(k) assets to the cash-balance pension plan. When the merger was completed, original BankAmerica employees were also encouraged to transfer $1.3 billion from the 401(k) accounts into the cash-balance plan at the new Bank of America, according to the Wall Street Journal.
Bank of America spokesperson Eloise Hale told the Associated Press that BofA has offered cash-balance plans for many years because they meet the needs of a "diverse and mobile work force." She continued that, “We believe that our plans have been designed and administered in accordance with applicable law.” Noting that the company does not comment on pending litigation, Hale added that, “We intend to defend ourselves vigorously against the claims."
Meanwhile, Bank of America is also a defendant in a pension-related lawsuit filed against FleetBoston Financial Corp., which it acquired in April.
According to the SEC filings, the suit alleges that FleetBoston violated the Employee Retirement Income Security Act (ERISA) by turning the Fleet plan into a cash-balance plan without notifying participants that the conversion would significantly reduce their benefits.