You might assume that retirement plan participants cannot sue their plan provider if they have not lost money. A case in front of the US Supreme Court could, however, challenge such an apparently common-sense argument.
While the legal action may result in greater protection for participants in a range of US retirement savings vehicles, such a win could further threaten the willingness of US employers to offer defined benefit schemes — a type of pension plan already in steep decline.
James Thole and others were members of a defined benefit plan managed by US Bank. Mr Thole sued its managers in 2008 because the plan had lost money after what the participants claimed was mismanagement by US Bank.
The ability of participants to take their managers to court “cannot be tied to the plan’s funding, which can be affected by market conditions and interest rates”, insists Ms Yau. The law “is supposed to ensure that plan participants don’t have to wait until the plan sponsors miss a benefits cheque before they can take the fiduciary to court.”
According to Ms Yau: “If you are a fiduciary managing plan assets, then you have to manage it responsibly. Our clients are entitled to seek remediation to protect the assets the plan holds in trust.”
Ms Yau believes the case will be significant for retirement savers beyond her client. “If we lose, the detriment will be pretty severe for all American workers and retirees relying on a defined benefit scheme to plan their later years — and people are living longer,” says Ms Yau.
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