posted on Saturday, December 01, 2007 7:51 AM
by
Lou Michels
ERISA Floodgates?
Again, my apologies for the paucity of posts--I've been away at trial for several weeks and cleaning up after that.
The Supreme Court heard oral arguments recently on an ERISA case that has wide-ranging implications. Larue v. DeWolff Boberg & Associates came before the court on November 26. The case involves a claim by an individual 401(k) pension plan holder against the pension plan administrators for a breach of fiduciary duty. This is a potentially landmark case, because it will be the first real test before the Supreme Court on the rights of an individual employee to seek liability against pension plan administrators directly where the individual's 401(k) investment turns out badly.
Most commentators are predicting a win for the employee. From my viewpoint, while such a win might be correct from a purely legal perspective, holding plan administrators individually liable for investment decisions in employer managed pension plans will probably open a flood gate of litigation both at the class-action and individual level. Without some type of statutory fix by Congress, it could mean that employers will simply get out of the pension business, forcing their employees to take the initiative to save on their own.
From a public policy perspective, this could be a disaster. Much like health insurance, most people have virtually no experience setting up a pension fund other than the one offered through their employer. With Social Security slated to go bankrupt within two generations, cutting the available options for private sector saving should be avoided at all costs.