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February 09, 2015 at 08:50 AM
RadioShack’s creditors weren’t alone this week in wondering what’s next for the bankrupt electronics retailer.
Upset participants in its 401(k) plan are awaiting their day in court, while regulators are probing how it managed its retirement plan.
Three lawsuits were filed on behalf of former and current RadioShack employees within weeks of each other in November and December, all alleging the company imprudently offered 401(k) participants company stock in their savings plan when fiduciaries knew it was bound to lose value.
In Singh v RadioShack, one of the “stock drop” claims filed in U.S. District Court for the Northern District of Texas, the plaintiffs’ attorneys claim the company’s plan fiduciaries should have known that matching contributions in stock, or offering them in the plan, was a bad idea, because of the “sea-change in the central risk-profile and business prospects of the company cause in part by corporate mismanagement,” according to court documents.
That claim points out the company’s 2009 Summary Plan Description explained a company match of up to 4 percent of salary, which could be contributed in the form of cash or company stock.
Shares of the iconic brand began to plummet in 2010.
On June 30, 2011, one of RadioShack’s plans held 2.9 million shares of company stock valued at $39.5 million. By June of 2013, the plan had increased its shares to 3.5 million, but their total value had crashed to $11.25 million.
