Opinion ID: 2966464
Heading Depth: 3
Heading Rank: 2

Heading: The Bonding Policy

Text: Both the Plan and ERISA § 412(a) require Plan fiduciaries to be bonded. Because the Plan cannot operate without fiduciaries, and fiduciaries cannot be appointed unless they are bonded, the Plan cannot operate without some sort of bonding policy. Hence, I would treat the bonding policy as an instrument under which the Plan is operated because the policy is indispensable to the operation of the plan. Bartling, 29 F.3d at 1070. Even though the Annual Report says the trustees are bonded and discloses the amount of the bond and the name of the surety company, participants should be able to examine the bonding policy and its terms to ensure that their interests are adequately protected. C. The Appraisal Reports and Supporting Documentation The Plan Administrator uses the appraisal reports to determine the price at which the Plan buys and sells Lundy shares. The Administrator also uses the reports to inform Plan participants how much their retirement accounts are worth. Thus, the reports are instruments under which the Plan is operated. An ESOP's core function is to buy and sell shares of the sponsor corporation. Plan fiduciaries are required to ensure that the Plan does not pay too much or receive too little for those shares. An accurate valuation of those shares, then, is absolutely critical to the Plan's operation. Plan participants are entitled to know how the value of their shares is calculated in order to assess whether Plan fiduciaries are faithfully protecting employee interests. Werner v. Morgan Equip. Co., 15 Employee Benefits Cas. (BNA) 2295 (N.D. Cal. 1992); see 27 Bartling (actuarial report); cf. Simpson v. Ernst & Young, 879 F. Supp. 802, 824 (S.D. Ohio 1994) (method by which benefits are calculated); Lee v. Dayton Power & Light Co., 604 F. Supp. 987, 1002 (S.D. Ohio 1985) (manual describing method of benefit calculation). Just because Lundy commissioned an independent appraisal does not mean Plan participants' interests have been adequately protected. An independent appraisal is not a magic wand that fiduciaries may simply wave over a transaction to ensure that their responsibilities are fulfilled. Donovan, 716 F.2d at 1474. For these reasons, I would hold that the stock valuation report and supporting documentation are instruments under which the Plan is operated.4