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IRS probing Bank of America's pensions

/ Source: The Associated Press

The Internal Revenue Service is auditing the 1998 and 1999 tax returns of Bank of America Corp.'s pension and 401(k) plans, which have been the subject of a class-action employee lawsuit.

The nation's third largest bank disclosed the audit in its quarterly filing Tuesday with the Securities and Exchange Commission.

This summer, some employees sued the bank over its cash-balance pension plan, which they say the company used as part of an "arbitrage scheme" to enrich itself at the expense of participants.

According to the complaint, Bank of America encouraged employees to transfer more than $2.7 billion of 401(k) assets into the bank's pension plan in 1998 and 2000.

The lawsuit, filed June 30 in federal court in Illinois, alleges that those transfers allowed Bank of America to invest the money for higher returns than what the bank would dole out to employees.

Bank of America spokeswoman Eloise Hale said the bank has offered cash-balance plans for many years because they meet the needs of a "diverse and mobile work force."

"We believe that our plans have been designed and administered in accordance with applicable law," she said Tuesday. "While we do not comment on pending litigation, we intend to defend ourselves vigorously against the claims."

Bank of America also disclosed in the filing that a class-action lawsuit was filed in September in Connecticut on behalf of former FleetBoston Financial Corp. employees.

That suit alleges that Fleet violated the Employee Retirement Income Security Act, or ERISA, by converting to a cash-balance plan in 1997 without telling employees it would reduce benefits. Bank of America acquired Boston-based Fleet in April.