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Compliance August 26, 2005
Recovering Losses For Individual Participants Is Recovery For The Plan
August 26, 2005 (PLANSPONSOR.com) - The US Court of
Appeals for the 3rd Circuit has disagreed with a lower court
decision that an ERISA case be dismissed because it was
seeking financial recovery of losses on behalf of some plan
participants and not the plan as a whole.
Reported by Rebecca Moore
In the 3 rd Circuit’s opinion , it said at issue was “whether the complaint seeks relief for the Schering-Plough Employees’ Savings Plan based on allegations that there were ‘losses to the plan resulting from [a] breach’ of fiduciary duty. In the opinion, the court pointed out that Section 1109 of ERISA allows recovery of “any losses” to the plan and doesn’t just allow recovery of losses that will be distributed to all participants.
The court also pointed out that a loss to any investment, though held in individual accounts, is a loss to the plan since all assets are held in trust by the plan.
Two employees of Schering-Plough Corp. sued the plan for breaches in fiduciary duty after company stock prices fell drastically. Company stock was offered as an investment option in the company’s retirement savings plan. According to an EBIA report, the employees alleged that the plan fiduciaries breached their duties by continuing to offer company stock when they new the price was “unlawfully and artificially inflated.”
The lower court dismissed the suit saying it sought relief for individual participant losses and not the plan as a whole. The 3 rd Circuit now says the suit may go to trial and the plaintiffs may seek monetary relief for their losses.
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