Monetary Relief Is Available for 401(k) Plan Participant's Claim that ERISA Fiduciary's Breach Caused Losses to Participant's Account According to Recent United States Supreme Court Decision

March 12, 2008

In late February, the United States Supreme Court expanded the realm of ERISA claims for which a participant could seek monetary relief against an ERISA fiduciary for a breach of fiduciary duty to include claims that a breach caused a loss to the participant's plan account. The case, LaRue v. DeWolff, Boberg, & Assocs., represents a major change in the landscape of ERISA litigation. For the first time, the United States Supreme Court allowed a participant in a defined contribution plan to sue for losses to the participant's account. Previously, courts had held that participants in defined contribution plans could not seek relief for losses to their individual accounts. In LaRue, the Court found that where a sponsor of a defined contribution plan (in this case, a 401 (k) plan), failed to implement the participant's investment elections, and such failure caused the participant's account to decline in value, the participant could seek monetary relief against the plan sponsor to restore the losses. 
 
In light of the recent ruling, plan sponsors of defined contribution plans should examine their current procedures for ensuring that a participant's investment elections are implemented as directed by the participant. The plan sponsor should also review its administrative processes, compliance with ERISA 404(c) (which protects against liability for a participant's investment choices), current investment policy, and fiduciary insurance to ascertain whether changes need to be made to protect itself from possible claims in light of LaRue. Should you have questions on the foregoing, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group,whose practice areas include ERISA and employee benefits.
 
 
This alert is provided as general information, and is not a substitute for legal or other professional advice. 

To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal Revenue
Service, we also inform you that any federal tax advice contained in this communication (including attachments) is
not intended or written to be used, and cannot be used, for the purpose.