August 27, 2019

If the Supreme Court backs beneficiaries over US Bank’s overfunded program, look for more actions against company retirement funds.

Can retirement fund participants sue their employer’s pension plan if it lost money but, because it was overfunded, they did not see their benefits curtailed? That’s the momentous issue before the US Supreme Court as it starts its new term in October.

Should the defined benefit plan members win before the court, expect more challenges to corporate pension plans whose investment performance has suffered, or perhaps even those with a questionable strategy.

. . .

Retirees James Thole and Sherry Smith accuse the banking company’s pension program of violating its fiduciary duties because in 2007 it invested all of the plan’s assets in stocks, instead of a more diversified mix that is standard among investment pools. The plan had been fully funded, but then the financial crisis hit the next year and it lost $1.1 billion. Suddenly, its funded status fell to 84%.

. . .

According to Karen Handorf, a partner at Cohen Milstein, which is representing the Thole plaintiffs, the pension plan invested “money into US Bank’s own mutual funds.” The bank later sold its fund subsidiary, FAF Advisors (that stands for First American Funds), to Nuveen Investments. 

The complete article can be accessed here.