Armstrong Offers Employee Stock Ownership Settleme
Lancaster, PA, Oct. 17--Armstrong World Industries Inc. has agreed to pay $1.5 million to end a two-year dispute with the U.S. Department of Labor over the company's employee stock ownership plan, an Armstrong filing says.
The Lancaster New Era reported that a proposed settlement is subject to U.S. Bankruptcy Court approval.
If the court approves the accord, the Department of Labor would not file a $33.4 million claim against the company in the complicated dispute, according to an Armstrong court filing last week.
At issue is the way Armstrong's Retirement Savings and Stock Ownership Plan (RSSOP) was repaying loans taken out by a predecessor plan, the Share-in-Success Plan.
The Share-in-Success Plan, an employee stock ownership plan, was formed in 1989. The plan borrowed $270 million to buy Armstrong preferred stock, to be distributed to Armstrong employees.
From its inception, the Share-in-Success Plan repaid the loans by using a combination of funds contributed by Armstrong and voluntary salary deferrals by employees participating in the plan. Its successor, the RSSOP, established in 1996, did the same.
The Internal Revenue Service ruled four times over the years that the Armstrong plans were using an acceptable method for repaying the loans, according to the court filing.
But the Department of Labor, which also regulates employee benefit plans, disagreed.
After a random audit of the RSSOP in 2001 and a subsequent investigation, the Department of Labor concluded that the RSSOP should not use salary deferrals to help repay the loans.
Doing so, said the Department of Labor, relieved Armstrong of part of its obligation to contribute to the RSSOP and caused employees to forego other--and possibly better--investment opportunities than the Armstrong stock.
Armstrong, which said it cooperated with the investigation, said it believed the company and the RSSOP "fully complied" with "all applicable laws and regulations."
Nonetheless, Armstrong agreed to the settlement to avoid costly litigation that would have an uncertain outcome, the court filing said.
The settlement calls for $1.5 million to be paid into the RSSOP, with $590,000 from Armstrong, $410,000 from the RSSOP's trustees and $500,000 from the RSSOP's insurers.
The money would be distributed to an unspecified number of RSSOP participants who deferred at least $250 in salary between 1996 and 2000, the last time deferred salary was used to help repay the loans. Those participants also would get extra Armstrong preferred stock.
Armstrong would agree to not use participants' deferred salary to help repay RSSOP loans, while the Department of Labor would agree to withdraw its limited objection to Armstrong's bankruptcy reorganization plan.
The Department of Labor also would agree not to sue Armstrong over the issue or file a claim for the $33.4 million, the amount of deferred salary used by the RSSOP to help repay the loans.
Further, the Department of Labor agreed to waive an unspecified civil penalty against Armstrong, because of the company's financial condition.
In another development in the Armstrong bankruptcy case, the company has asked the court to approve a second extension of the deadline for voting on its reorganization plan. This latest extension would move the deadline from Friday to Oct. 31.
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