Supreme Court Says 401(k) Participants Can Sue

The Supreme Court has ruled that participants in 401(k) retirement plans can sue their providers for losses if their instructions are ignored or their account is mismanaged.

 

The high court’s unanimous ruling was a huge victory for the Employee Retirement Income Security Act of 1974 (ERISA).

 

The case was brought by James LaRue, an employee of a Dallas-based consulting firm, who gave specific instructions to his fund administrator to shift his investment from one mutual fund to another that was more conservative. His instructions were ignored and LaRue lost $150,000.

 

Writing for the court, Justice John Paul Stevens said that while participants in defined benefit plans rely completely on the health of the plan as a whole, a defined contribution plan consists of individual accounts. The law should be applied differently in the two situations, he said.

 

Approximately 70 million Americans hold about $3 trillion in 401(k) investments.

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