A recent Supreme Court decision has opened the gates for 401(k) participants to sue their plan administrators for negligence.
A recent Supreme Court decision has opened the gates for 401(k) participants to sue their plan administrators for negligence. Under the Employee Retirement Income Security Act of 1974, individuals enrolled in retirement plans were generally barred from recovering losses due to a breach of fiduciary duty-until now. The case in question involved a Texas man who, in 2001 and 2002, directed his former employer (which also served as the plan administrator) to make certain changes to the investments in his account. The company's failure to do so "depleted" the employee's interest in the plan by about $150,000, he argued. It wasn't clear whether that amount represented actual losses or missed opportunities from his employer's inaction.
The case is important, say some pension experts, because it may encourage employees to sue for infractions less serious than flat-out negligence. That, in turn, could cause smaller employers-including physicians' practices-to shy away from offering 401(k) plans to their staff.