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Articles

Supreme Court Expands ERISA Remedies For Individual Employees

 

The Supreme Court reached a decision that will definitely have far reaching consequences for all employers. The Court held that ERISA allows an employee to sue his employer because of a fiduciary breach that resulted in individual losses to his 401(k) plan.

The plaintiff in the case informed his employer that he wanted to chance his asset allocation in his 401(k). The plaintiff did not find out for over 10 months that his employer failed to follow his directions. He repeated the request and the employer failed again to follow the instructions. The miscommunications ended up costing the plaintiff $150,000. He sued his employer under ERISA in an attempt to recover the losses.

Relying on a tried an true defense, the employer argued that ERISA only provides a remedy for fiduciary breaches that result in losses to the entire plan, not those that result in losses to a single employee. The Supreme Court held ERISA allows employees to recover for an employer’s breach of fiduciary duties with regard to a 401(k) plan regardless of whether it diminishes plan assets payable to all participants or only to one individual employee.

The case is going to have a major effect on the level of ERISA litigation in this country. The economy may or may not be in a recession, but the state of the economy will lead many to file meritless claims against their employer based upon this new ruling to attempt to recoup losses in their 401(k) plans. The employees will probably see the losses begin to build up in their retirement plans and will try to blame every investment decision on the employers.

We will keep you updated on the results of this case in future monthly updates.

Brody and Associates regularly provides counsel on all labor and employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.