Saturday, April 11, 2009

$75 Million - Merrill Lynch ERISA Suit

I got some legal paperwork in the mail the other day and didn't focus on it until a half hour ago. I'm actually glad I did. I used to work at Merrill Lynch, a company that got sued a lot. Notice in the mail of another class action suit that I was either included in or could get involved in was nothing new.

It turns out that this one was an issue I feel strongly about. The suit alleges:

"that Defendants knew or should have known that the Plans’ investment in Merrill Lynch common stock was not a prudent retirement investment and that Defendants acted imprudently by not preventing further investment in Merrill Lynch common stock and not liquidating those holdings."

There are two reasons that this issue got traction this this time around. One is that Merrill had lots of subprime exposure which is currently public enemy number one, and second is the fact that BofA bought the company and is desperately trying to make all the noise go away. I actually googled the suit and it turns out that BofA already settled it. For $75 million. That's real money but at slightly more than $1000 per employee it's not at the same time.

Subprime exposure or not, it is a very bad decision most of the time for an employee to invest (voluntarily) in company stock in his/her retirement account. The company already signs your paycheck, which makes it the top one or two biggest risks in your family's financial profile. The company (or your spouse's) is probably responsible for and subsidizes your health insurance, and maybe your life and disability insurance. You might have bought company stock in an employee stock purchase plan.

If you like your job, you probably like the company you work for. If you like the company and you're not a professional investor, you probably think that the stock is a good investment. Stop thinking like that and get diversified. There are all kinds of risks out there.

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