Overview -

Court cases challenging the actions of Employee Retirement Income Security Act fiduciaries have continued unabated since the scandal of Enron in 2002. Since then, a large number of cases are in the ‘‘stock drop’’ area, which encompasses cases relating to employer securities investments when the stock price drops severely. The litigation has focused on whether a presumption of prudence exists that protects fiduciaries holding employer securities investments on behalf of a retirement plan. In June 2014, the U.S. Supreme Court ruled in the case of Fifth Third Bancorp v. Dudenhoeffer that ERISA doesn’t provide a presumption of prudence to protect fiduciaries of plans investing in employer securities.1 Now that the Dudenhoeffer decision resolves the presumption issue, it is reasonable to expect that ERISA cases may return to focus on the fiduciary duties of a directed trustee.

ERISA provides that a directed trustee is intended to follow the direction of a plan’s ‘‘named fiduciary.’’ The directed trustee’s exposure for ERISA fiduciary liability, it stood to reason, was therefore limited. Directed trustees may, however, have fiduciary exposure. When employees’ retirement benefits have suffered significant losses, plaintiffs have looked to recover from all involved, including the directed trustee. Some questions that cases have raised are...

Originally published in Benefits Practitioners’ Strategy Guide on December 15, 2014.