Sunday, February 24, 2008, 11:35 AM

SCOTUS Overturns 4th Circuit, Holds Employees May Sue 401(k) Managers For Mismanagement And Injuries To Individuals' Accounts

Last week, with LaRue v. DeWolff, Boberg & Associates, Inc., SCOTUS overturned the 4th Circuit and held that ERISA authorizes 401k retirement account holders like the plaintiff in that case to sue for and recover losses when retirement plan managers breach their fiduciary duties, adversely affecting individuals' accounts.

SCOTUS held that "[t]he principal statutory duties imposed on fiduciaries by [ERISA] relate to the proper management, administration, and investment of fund assets, with an eye toward ensuring that the benefits authorized by the plan are ultimately paid to participants and beneficiaries," and the misconduct alleged by LaRue -- that his manager failed to follow his investment instructions and left his money in less lucrative investments, resulting in $150 k in losses to his 401K account -- falls squarely within that category. SCOTUS held the 4th Circuit erred when it tossed LaRue's suit and mistakenly held that the pertinent ERISA statute provided remedies only for entire plans and not individuals. Indeed, individual accounts are part of plans, and therefore injuries to individual accounts affect plans.

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