Will there be an onslaught of lawsuits now that the Supreme Court has ruled that participants in a 401(k) plan can sue to recover losses to their account when a plan sponsor or other plan fiduciary mishandles their account?
Fred Reish of Reish Luftman Reicher & Cohen in Los Angeles, which specializes in employee benefits law, says it’s “inevitable” that other copycat suits will crop up, though he doesn’t think the Supreme Court ruling will “unleash a tsunami of litigation.”
In LaRue v. De Wolff, Boberg & Associates, Inc., the Supreme Court focused on section 502(a)(2) of ERISA, a provision that allows participants and beneficiaries to sue for “appropriate relief under section 409″ of ERISA, according to The Wagner Law Group in Boston. Section 409, Wagner explains, provides that any person who is a fiduciary with respect to a plan and who breaches any of the responsibilities, obligations, or duties imposed on fiduciaries by Title I of ERISA “shall be personally liable to make good to such plan any losses to the plan resulting from each such breach ….”
In the LaRue case, a plan participant sought to use these provisions to recover a loss of $150,000 suffered when the plan administrator failed to properly implement his instructions as to how his account should be invested. The decision, which was written by Justice John Paul Stevens, overturned a ruling by the 4th U.S. Circuit Court of Appeals in Richmond. The ruling only affects participant directed plans like 401(k)s and ERISA-governed 403(b)s, Reish notes.