Retirees can sue employers who mismanage retirement investments

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in Employee Benefits Program,Human Resources

The 3rd Circuit Court of Appeals has expanded the class in a class-action suit brought by former workers and retirees against their employer. The case centers on Conexant Systems Inc., which offered its own stock among the investment options employees could choose from when structuring their 401(k) plans.

The stock fell from $7.42 per share to $1.70 in seven months during 2004.

The suit, initiated by the AARP, asserts company executives, whose poor decisions caused company stock to tumble, should be held accountable to employees who invested in company stock through retirement plans.

The key issue in this ruling was whether the class should be confined to current workers, or whether to include retirees who had already cashed in their 401(k)s. The court looked to the Employee Retirement Income Security Act and found the act defined participants to include retirees as well. The ruling opens the door to other employees and retirees to bring similar lawsuits.

Final note: This case is one of many that the AARP is litigating on behalf of its members. No longer content to be an advocacy group, the AARP is taking legal aim at employers.

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