The Employee Retirement Income Security Act (ERISA) applies to pension plans and retirement plans offered on the private market. An employee may be able to sue a retirement plan or a pension plan under the terms of ERISA.
Anyone who oversees or takes part in managing an employee’s retirement investment is a fiduciary. Lawsuits brought under ERISA usually involve a claim that an employer or a third-party money manager violated a fiduciary duty.
Employers or third-party money managers have the following fiduciary duties:
- Duty to Diversify: an employer or a money manager must minimize investment risks by making sure that retirement funds are well-dispersed among a number of investments.
- Duty of Loyalty: fiduciaries must act in the best interest of employees and prospective retirees.
- Duty of Obedience: fiduciaries must follow retirement plan guidelines as well as ERISA regulations.
- Duty of Care: fiduciaries must managed employees’ invested contributions with the level of care that could reasonably be expected from such professionals.
- Exclusive Purpose Rule: the retirement plan exists to benefit the participating employees—not to make extra-money for the employers.
A fiduciary in care of the retirement plan will be held personally liable for violating any of the above duties.
Individual employees may sue plan managers or/and employers with the following individual claims:
- Failure to timely execute participating employees purchase and sale decisions
- Failed to offer appropriate investment strategies
- Failure to disclose material information
Note: since everyone who takes care of the retirement plan is a fiduciary, liability may spread to employers, plan managers, and other professionals who take care of retirement assets.
It may be a serious challenge to bring a successful lawsuit regarding the management of a retirement plan. Employers and managers are likely to raise many legal defenses. Therefore, employees are still relying on class actions. Here are several examples of class action claims that pertain to fiduciary duty violations:
- Anti-cut Back Claims: promised or/and vested benefits were taken back
- Claims for improper transactions related to the investments in a retirement plan
- Fees Claims: retirement plan fiduciaries were paid too much for overseeing plan assets
- Dropping Stock Claims: investment were mismanaged
Legal claims under ERISA are highly complex. If you believe that you have a claim concerning the management of your retirement fund, you should speak with an experienced employment attorney immediately.