The holidays may have gotten a little less merry and bright for former employees of Naugatuck Valley Savings and Loan, acquired and dissolved by Liberty Bank almost a year ago.
The workers must pay perhaps thousands of dollars back to their retirement plans issued by Naugatuck Valley Savings and Loan, or NVSL, before the $78 million merger took place last January due to a $2.4 million overpayment error.
It is not known how many former NVSL employees were impacted by the error or how much they owe individually. At the time of the bank acquisition, NVSL had about 120 employees.
Calls to Liberty Bank were not immediately returned.
Liberty Bank recently sent a letter to plan participants stating an independent audit of the “NVSL KSOP Plan,” a stock ownership- 401k plan, revealed that NVSL on Dec. 7 bought back 230,815 shares from the plan for $2,538,963 so that the plan could repay two loans it took out to buy the shares and be terminated. The plan’s trustees did not return the sold shares to the bank, thus leaving a total balance of 262,023 shares valued at $2,882,253 in the plan, closed December 2015 as part of the acquisition.
The transaction’s settlement agent deposited that amount into the plan, when only $475,375 — derived from 31,208 shares valued at $343,291 and $132,085 in loan profit — should have remained in the “Unallocated Stock Account” and given to employees.
Liberty Bank stated in the four-page letter that it is “taking these actions as a successor to NVSL,” as required by Internal Revenue Service and Employee Retirement Income Security Act laws governing retirement plans.
“The significant errors that occurred under the direction of NVSL and its advisers are very unfortunate,” Chief Human Resources Officer Rob Parry and Chief Financial Officer Thomas Pastorello stated in the letter. “Liberty Bank recognizes the inconvenience and financial disruption these errors have caused you and sincerely regrets that we must engage in this effort.”
The letter stated that the employees, as a “Fiduciary of the Plan,” are obligated to pay back the amount overpaid them under the act as they are “personally liable for losses to the Plan,” including overpayments.
The letter also stated that failure to remove the “ineligible Overpayment Amount” from other retirement plans they may have rolled them into would result in “adverse tax consequences,” including to those plans’ tax status.
The letter was accompanied by forms enabling employees to refund the money to the bank to pay off the loans.
Liberty Bank, a mutual bank founded in 1825, has 55 outlets in the state, including branches in Beacon Falls, Bristol, Cheshire, Naugatuck, Seymour, Southbury, Southington and Waterbury. It has almost $4.5 billion in assets.