Strategy: Review the safeguards for your retirement plan. An employer may be held liable for personal losses sustained in a 401(k) account, according to the new case. (LaRue v. DeWolff, Boberg & Associates, S. Ct. 06-856, 2/20/08)
The Supreme Court’s decision erases decades of legal precedent.
Facts: An ex-employee alleged that his employer failed to follow instructions to shift mutual fund shares in his 401(k) account to achieve a more conservative mix. The employee subsequently suffered investment losses of $150,000. He sued the employer for violating the Employee Retirement Income Security Act of 1974 (ERISA).
The 4th Circuit Court of Appeals sided with the company. It cited a prior case establishing that an employee can’t pursue this legal remedy for an ERISA-based violation. (Massachusetts Mutual Life Insurance Company v. Russell, 473 U.S. 134, 1985)
But the Supreme Court reversed the lower court. It noted that the previous case involved a defined that does not have individual accounts. The Supreme Court unanimously ruled that an employer may be sued under ERISA for investment losses in a defined contribution plan such as a 401(k).
In light of the new decision:
- Review compliance standards and procedures for following participant directions.
- Revise policies concerning investment options.
- Grant participants more access to investment advisors.
- Document advisory fees relating to administration of the plan.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Employee running errand still covered by comp
- Domino's rewards boss for saving stranger's life
- Can we fire someone who is costing us a fortune in workers' comp claims?
- Got Milk? Understand the Link Between Federal & State Breastfeeding Laws