The U.S. Supreme Court has handed down an important new ruling that could open the floodgates for claims by employees charging that their employers mishandled retirement accounts.
The new case involved James LaRue, who filed a lawsuit under ERISA—the federal law that governs employee benefits—claiming that his employer’s failure to follow his investment directions under the company’s 401(k) plan resulted in the depletion of LaRue’s interest in the plan, to the tune of about $150,000. The gist of LaRue’s case was that the employer, management consulting firm DeWolff, Boberg & Associates, breached its fiduciary duty by not making investments as LaRue directed and therefore owed him the shortfall. DeWolff, however, argued that ERISA only provides a remedy for breach of fiduciary duty where the plan as a whole was injured, and not just particular individuals.
he high court, in a unanimous opinion, sided with LaRue. The court ruled that ERISA language allowing the recovery of “any losses to the plan” that were caused by a fiduciary breach applied not just when the plan as a whole was injured, but also when the misconduct impaired the value of assets in a plan participant’s individual account.
As a result of this decision, employers can expect to see a wave of new ERISA claims challenging how individual 401(k) accounts are handled. We’ll have full details on this new case, including guidance on how to protect yourself, in an upcoming issue of the California Employer Advisor.
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