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Regulation and Compliance > Federal Regulation > DOL

Wells Fargo to Pay $145M Over Company Stock in Its 401(k) Plan

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What You Need to Know

  • Wells Fargo and a plan trustee caused the plan to pay more for stock than it would be worth when deposited in participants’ accounts.
  • The bank agreed to put $131.8 million into a trust for current and former plan participants.
  • It will also pay a penalty of nearly $13.2 million.

The Labor Department on Monday said it has reached a settlement with Wells Fargo and Company, Wells Fargo Bank and GreatBanc Trust Company — a plan trustee — that recovers more than $131.8 million for the retirement plan’s participants after a department investigation found that, from 2013 through 2018, the fund overpaid for company stock purchased for the plan.

Wells Fargo also agreed to pay a penalty of nearly $13.2 million as part of the settlement.

Wells Fargo and GreatBanc entered into the settlement without admitting or denying the allegations made by the department.

Labor Secretary Marty Walsh said Labor’s investigation “found those responsible for Wells Fargo’s 401(k) plan paid more than fair market value for employer stock and, by doing so, betrayed the trust of the plan’s current and future retirees.”

The settlement “shows the Department of Labor will act when we find retirement assets are misused and benefit plans suffer,” Walsh said.

The action follows an investigation by the department’s Employee Benefits Security Administration that determined Wells Fargo and GreatBanc Trust Co. caused the 401(k) plan to pay between $1,033 and $1,090 per share for Wells Fargo preferred stock.

“Specifically designed for the plan, the stock converted to a set value of $1,000 in Wells Fargo common stock when allocated to participants,” Labor explained. “In transactions between 2013 and 2018, the plan borrowed money from Wells Fargo to purchase the preferred stock.”

Wells Fargo and GreatBanc caused the plan to pay more for stock than it would be worth when deposited in participants’ accounts.

EBSA investigators say they also learned that “Wells Fargo used the dividends paid on the preferred shares to defray its obligation to make contributions to the 401(k) plan, by using the dividends to repay the stock purchase loans.”

The investigation revealed the transaction “was designed to cause the 401(k) plan to pay more for each share of stock than plan participants would ever receive,” EBSA said.

Once Wells Fargo pays the $131.8 million settlement amount to the trust, the funds will be allocated to current and former participants affected by these transactions, according to EBSA.

Wells Fargo will redeem the remaining convertible preferred stock for common stock and will stop using dividends from the convertible preferred shares to repay the stock purchase loans.

In addition, Labor said that GreatBanc will not act as a fiduciary to a public company in connection with any future leveraged transaction involving an employee stock ownership plan, unless the plan acquires only publicly traded stock and pays no more than the fair market value.

Wells Fargo said in a statement Monday that it “strongly disagrees with the DOL’s allegations and believes it followed applicable laws in conducting the transactions. Though the Company disagrees with the DOL’s allegations and has not conducted these transactions since 2018, Wells Fargo believes resolving this legacy matter is in the best interest of the Company.”

Wells Fargo said in its statement that “all 401(k) Plan participants received all matching and profit-sharing contributions due to them. An independent third-party approved the transactions on behalf of the 401(k) Plan and confirmed that the 401(k) Plan did not pay more than fair market value for the Company stock at issue.”


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