A United States Supreme Court ruling on Wednesday has opened the door for individuals to sue 401(k) and 403(b) plan fiduciaries over individual losses in their accounts when their investment instructions are ignored or the accounts are otherwise mishandled. The facts in LaRue v. DeWolff, Boberg & Associates, Inc., No. 06-856 (2008) are not uncommon. In LaRue, a plan participant directed the plan administrator to make investment changes in his account, but the plan administrator failed to carry out the direction. The Court's finding modifies prior interpretations of the Employee Retirement Income Security Act ("ERISA"). Based on a lower court's decision that the failure constituted a breach of fiduciary duty, the Supreme Court ruled that the individual participant was permitted under ERISA to recover from the plan administrator the lost investment earnings attributable to the failure.

Before this decision, the Supreme Court had ruled that only a fiduciary breach affecting the entire plan could serve as the basis for a lawsuit seeking relief from ERISA fiduciaries. Now, LaRue potentially broadens the scope of relief available for breaches of ERISA fiduciary duty. The Supreme Court's decision comes at a time when many individuals are suffering investment losses in their 401(k) and 403(b) plans. Employers who sponsor these plans and plan fiduciaries should take precautionary steps to review, evaluate and update their plan documentation, communication materials, operational procedures and vendor performance to ensure that they have good records and a strong position to defend claims.

Ballard Spahr's Employee Benefits and Executive Compensation and Labor, Employment and Immigration Groups can assist you with a review of your fiduciary practices and procedures, which may pay dividends when defending a breach of ERISA fiduciary duty lawsuit down the road. If you would like more information, please contact any of the lawyers above directly, or through www.ballardspahr.com.

 


 

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