The general rule of law that applies to both pension plans and retirement plans that are offered on the private market is known as, “The Employee Retirement Income Security Act (ERISA).” Under the terms of ERISA, an employee may be able to sue the manager responsible for maintaining either their retirement plan or pension plan.
Any individual who oversees or actively plays a role in managing an employee’s retirement investment is considered a fiduciary. A fiduciary is simply a person who has a legal duty to behave ethically in regard to another person’s financial interests.
As such, lawsuits brought in accordance with the conditions provided by ERISA, will typically involve a claim that an employer or a third-party money manager violated a fiduciary duty that they owed to the plaintiff-employee.
It is important to remember, however, that since ERISA solely applies to private sector employers, an employee may only file a lawsuit against a private employer.
Specifically, two kinds of employers are exempt from ERISA guidelines: governmental agencies (including federal, state, or local), and plans provided to employees by a church.
Therefore, if your employer falls under either of these two categories, then you will not be able to bring a lawsuit against them under ERISA.
What are Some Fiduciary Duties That May Be Raised in a Lawsuit?
As fiduciaries, private employers or related third-party money managers are responsible for the following duties:
- Duty to Diversify: An employer or a third-party money manager must minimize any investment risks by making sure that the employee’s retirement funds are sufficiently spread out between a number of different investments.
- Duty of Loyalty: Fiduciaries are required to act in the best interest of their employees and any prospective retirees.
- Duty of Obedience: The fiduciaries must adhere to the rules set out by ERISA, as well as any relevant guidelines laid out by the type of retirement plan.
- Duty of Care: Fiduciaries must also manage their employees’ invested contributions in accordance with the level of care that would reasonably be expected from similarly situated professionals.
- Exclusive Purpose Rule: The Exclusive Purpose Rule basically states that these retirement plans exist for the benefit of the participating employees; not to make extra money for the employers.
A fiduciary who is in charge of an employee’s retirement plan can be held personally liable for violating any of the above listed duties.
What Claims May Apply to Retirement Plan Administrators?
Individual employees may be able to sue their plan manager and/or employer based on the following legal claims:
- Failure to execute any participating employees’ purchase and sale decisions in a timely manner;
- Failure to disclose material information about the plans;
- Failure to offer proper investment strategies;
- Failure to distribute the benefits associated with the plan for unjust reasons; and
- Other various scenarios that may lead to a violation of ERISA.
As previously mentioned, since anyone who takes care of an employee’s retirement plan is considered a fiduciary, liability can spread not only to employers, but also to plan managers and other types of professionals who are responsible for maintaining the retirement assets.
Can I Bring a Class Action Lawsuit Against a Retirement Plan Administrator?
Lawsuits involving the mismanagement of an employee’s retirement plan can pose serious challenges that may make it difficult for the claimant to obtain a successful outcome. This is due to the number of defenses that an employer or manager may raise. Therefore, a better course of legal action for such issues might be to file a class action lawsuit.
The following are several examples of types of class action claims that pertain to fiduciary duty violations:
- Dropping Stock Claims: This claim means that the investments associated with the plans were likely mismanaged;
- Fees Claims: This occurs when the retirement plan fiduciaries were paid too much for the task of overseeing plan assets;
- Improper Transactions: These are claims involving the improper usage of investments related to a retirement plan. For example, if the manager used the investment money to purchase a personal item, rather than for the benefit of the contributing employees.
- Anti-cut Back Claims: This happens when the manager or employer takes back benefits that were promised or already vested in the plans.
Do I Need to Hire a Lawyer for Help with a Retirement and Pension Plan Lawsuit?
Legal issues based on violations of ERISA can often result in highly complex lawsuits. This is true regardless of whether you are an employee or an employer filing such a claim. Therefore, you should strongly consider hiring an experienced employment lawyer as soon as possible.
A qualified employment lawyer will be able to determine whether or not you have an adequate claim regarding the management of your retirement fund as an employee, and if so, can help you to protect your rights and ensure that you receive the proper amount of benefits owed to you.
Alternatively, if you are an employer who is concerned about whether or not your business is properly complying with ERISA standards, an employment law attorney can assist you with settling a dispute and creating a benefit plan that protects both you and your employees.