The nation’s highest court has agreed to hear a case that considers when pension plan participants under ERISA can sue their plan administrators for mismanagement, even years after the alleged misconduct took place.
It is the first case the Supreme Court will hear regarding excessive 401(k) fees. The Employee Retirement Income Security Act of 1974 (ERISA) imposes duties on fiduciaries, such as plan administrators, to administer the plan prudently and for the exclusive benefit of participants.
The case arose when employees at Edison International attempted to sue their plan administrators for breach of fiduciary duty. Fiduciaries of the plan chose higher-cost mutual funds, even though identical funds were available at a lower cost. However, according to lower courts, their claim was barred by ERISA, which limits the time employees can sue to six years after the date of the last violation. The fiduciaries purchased the high-cost mutual funds in 1999. The beneficiaries first sued in 2007.
The beneficiaries contend that the purchase of the high-cost mutual funds was not the end of the breach. Instead, the plan participants contend that fiduciaries have a continuing obligation to make prudent investments, no matter when the original purchase of investments was made. The beneficiaries also noted that any new fiduciaries have an obligation to correct past fiduciary failures.
The case has significant money at stake. Over 20,000 participants have sued, with $3.8 billion in assets at question. In 2013, the 9th Circuit Court of Appeals held that allowing the plan’s participants to sue would “make a hash out of ERISA’s limitation period” and lead to unworkable plans and lawsuits in the future.
The U.S. Solicitor General, however, sides with the plan participants. The U.S. Solicitor General’s Office filed an amicus (“friend of the court”) brief stating that the fiduciaries violated their continuing obligation by continuing to offer higher-cost investments. The Supreme Court will not issue a decision on the matter for a number of months.
Concerns over ERISA disputes?
For employees who have become involved in a dispute governed by ERISA, an experienced ERISA litigation firm such as DeBofsky Sherman Casciari Reynolds P.C. can help. Employee benefits are an integral part of an employee’s compensation package. Excessive fees or mismanagement can reverse years of savings. ERISA establishes national standards of conduct and responsibility regarding 401(k) investments and retirement savings plans. A violation of those duties means that plan participants can sue to recover the money lost due to mismanagement.
ERISA also governs other employee benefits, such as short-term disability, that can create myriad issues when denied. Employees looking to protect their rights under the law should contact DeBofsky Sherman Casciari Reynolds P.C. to discuss their legal issues and options.