401(k) Participant Entitled to Sue for Investment Losses
| February 27, 2008 |
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The U.S. Supreme Court ruled last week that a participant may sue for losses to his 401(k) account caused by the employer's failure to carry out investment instructions. Based on prior court rulings, many practitioners thought participants had no cash remedy for such breaches by plan fiduciaries and could only force fiduciaries to carry out the terms of the plan. The ruling in LaRue v. Dewolff, Boberg & Associates, Inc. clarifies that an individual participant may bring a claim for money damages for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA), though several key questions remain unanswered.
In light of this ruling, employers should review investment plan procedures so they can be confident that employee investment instructions are well documented and properly handled. Summary plan descriptions and other investment information should be reviewed to determine if employees are obligated to review investment summaries to be sure their investment instructions have been implemented. In addition, fiduciaries for plans will want to review their fiduciary insurance and indemnification rights to be sure they are adequately covered for potential claims. Continue reading...
