Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

Nothing like a U.S. Supreme Court case on employee benefits to get the blogs to come alive.  And yet, for some reason, I've had difficulty getting exciting about a case decided this week.

First, for those whose kids have been on vacation this week, a recap from Michael Moore of Pennsylvania Employment Law Blog.

The United State Supreme Court ruled that ERISA allows individual claims by plan participants for breach of fiduciary duty that result in losses to an individual account rather than only to the entire plan. In LaRue v. DeWolff, Boberg, & Assoc., Inc., an employee brought an ERISA claim against his employer who was the plan administrator of a 401k plan. The employee claimed $150,000 in losses to his 401k account caused by his the failure to make the changes the employee directed in the investments held in his account. The employee claimed that the failure to make the changes was a breach of fiduciary duty under ERISA. The Court noted the change in the retirement plan landscape from defined benefit plans to defined contribution plans necessitates the recovery of fiduciary breaches in a participant’s individual account. The Court did not decide whether the employer breached its fiduciary duty.

But will this lead to a slew of meritless lawsuits, as some predict? Count me in the group as "not yet convinced" and still puzzled whether this will truly impact 401(k) administration. 

Why? Because while the court did open the door to more lawsuits -- probably on a  breach of fiduciary duty claim -- on an individual basis, the standard for proving such lawsuits remains the same and still high. Without being too technical, a participant in a breach of fiduciary duty case needs to show, for example, that the plan did not discharge its duties with the same "care, skill, prudence, and diligence" that a prudent person would use under similar circumstances.

In the LaRue case, the court didn't even decide whether the plan acted prudently or not, since it sent the case back down.  But I believe the facts alleged seemed so outrageous (plan refuses to abide by participants instructions) that the court couldn't turn a blind eye to an outcome that would allow the plan to avoid liability entirely.

Stephen Rosenberg of Boston ERISA & Insurance Litigation Blog raises some other head-scratching questions:

Does the majority’s heavy emphasis on the fact that LaRue concerned a defined contribution plan hint at a belief among the majority that, in fact, ERISA needs to be treated as an organic, evolving body of law that needs to shift from its past precedents to account for the rise of defined contribution plans? And if so, is the emphasis on this point in the majority’s opinion a subtle suggestion to lower courts to approach new issues brought before them concerning defined contribution plans - or even old issues never before resolved under defined contribution plans - with an eye to how ERISA should develop to fit those types of plans?

These are, to be sure, interesting and noteworthy points worth debating in the intellectual discourse about the case.

However, from a practical perspective, I'm not sure much will change for 401(k) plan administrators. They have had to act and should continue to act prudently in administering the plan.  If anything, they should recognize that their decisions may be under more of a microscope than in the past. But for those plan administrators who have always acted under a microscope and been cautious in their decision-making processes, the LaRue decision isn't going to change the way they act.

So, let others debate whether individual lawsuits under 401k are a good or a bad thing. While they are doing that, employers can refocus their efforts to make sure that their 401k is being properly administered either by them or a company hired to make such decisions.

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One of the pleasures of writing a blog is discovering other blogs out there discussing interesting topics.  These are some of the entries this past week or so that caught my eye, in no particular order.

• The HR Capitalist Blog, run by Kris Dunn, has combined two subjects near and dear to my heart -- baseball and employment law -- into a "Carnival" post. What is a Carnival post? Essentially, just a "best of" various blogs for the human resources area.  It's a fun entry that ties in the topics well.  (And I certainly appreciated the mention the blog.) 
  
  
• The Alaska Employment Blog has a thought-provoking post as to what an employer should do when it has misapplied a policy in the past.  In other words, must the employer continue this "mistake" with later employees who may be similarly situated to the first employees? Will Schendel suggests no, and provides a path for employers to consider.  Of course, he is quick to note that not all situations will be able to apply this, but its also a good reminder that the best companies are the ones that recognize mistakes and fix them.
  
  
• The Evil HR Lady's humorous posts always get a chuckle. I'm amazed at some of the questions that people her.  This question -- regarding whether a company could fire employee for dating a co-worker -- is one such example. But what I particularly enjoyed was Evil's dead-on response -- spoken like an HR person with experience. 

Yes. You can be fired for dating a co-worker. You can be fired for picking your nose. You can be fired because your boss decided that he doesn't like what you eat for lunch.

And, Evil isn't afraid to acknowledge that some questions are best left for legal counsel. Sage comments for any HR generalist out there. 

• Finally, the Workplace Prof Blog, which discussed an earlier article I had written this week,  also had a notable post that references 11 common 401(k) mistakes and how to fix them. Most notably, the listing of mistakes and solutions does not come from an academic or a practitioner, but from the IRS itself, via a 43-page hyperlinked document.  As I have talked about previously, HR employees and in-house counsel work best when they can spot issues, even when they don't know the solution.  This document is a great resource, particularly for those who dabble in 401(k) plans but may not have a particular expertise, such as HR personnel at small-to-midsize companies.

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