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Supreme Court Says Individuals Can Sue Over 401(k) Losses

a unanimous decision, the Supreme Court on Tuesday ruled that employees
can sue their employers to recover loses from the mismanagement of a
401(k) plan. The decision, a reversal of the lower court, has
implications for the more than 50 million individuals who have more
than $3 trillion invested in retirement plans.

James LaRue sued his former employer under the Employee
Retirement Income Security Act of 1974 (ERISA), alleging that he asked
his employer to make certain changes to the investments in his
individual account, but the employer never carried out these
directions. LaRue claimed the employer’s inaction cost him
approximately $150,000. The U.S. Court of Appeals for the Fourth
Circuit ruled that employers were not liable for losses suffered by
their employees, even if the retirement accounts had been mismanaged.
According to the court, ERISA "provides remedies only for entire plans,
not for individuals."

In a decision written by Justice John Paul Stevens, the U.S.
Supreme Court overturned the Fourth Circuit’s decision. Stevens
recognized that the retirement landscape has changed since prior
decisions on this issue, with 401(k) plans increasing in popularity.
Because 401(k) plans have individual accounts, Steven’s wrote, an
individual employee can sue his or her employer for mismanagement of
the employee’s account even if the entire plan is not affected.

LaRue v. DeWolff, 552 U. S. ____ (2008).

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