We had a great client Dorsey Roundtable on March 24, 2016 to discuss employer stock in retirement plans. It’s been a few years now since the 2013 blockbuster opinion from the Supreme Court (back when they had 9 justices) in Fifth Third Bancorp v. Dudenhoeffer that gave some direction on this thorny topic.

Andrew Holly, one of our resident ERISA litigators, provided us with his typical pithy summary of the Dudenhoefer holding:

• There is no special presumption that investments in company stock are prudent, but a “plausible” violation must be pled for a case to go forward.
• Fiduciaries are not required, or allowed, to trade on inside information in violation of insider trading rules.
• Under efficient market theory, fiduciaries may rely upon publicly available stock price to determine value absent “special circumstances.”
• Allegations must plausibly allege remedial steps would have actually benefited participants.

Other discussion topics included:

• Plan document, i.e., to hardwire or not?
• Practical risk mitigation, e.g., message from the top that employees will not be viewed as “disloyal” if they diversify, effective communications that might be used as evidence when things get messy, etc.
• Independent fiduciaries – pros and cons.
• Committees – who serves & how many?
• Investment Policies – the holy grail?

We expect to continue this discussion along with other topics in our 2016 Roundtables.