Car Dealer Insider May 1, 2008
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Car Dealer Insider May 1, 2008

High court ruling puts onus on dealers to bone up on pension plan fiduciary duties

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High court ruling puts onus on dealers to bone up on pension plan fiduciary duties

Add one more thing to the growing list of issues that your dealership employees - or former employees - can sue you for: losses in their individual retirement plan assets.

On February 20th, the U.S. Supreme Court unanimously ruled that individual participants in 401(k) and other retirement plans may recover harm to their plan assets due to a breach of fiduciary duty by the plan sponsor (_LaRue v. DeWolff, Boberg & Associates, Inc., et al., No. 06-856). Previously, relief granted for fiduciary breach was required to benefit the entire plan, not jut an individual participant.

Background

James LaRue participated in a defined contribution pension plan sponsored by employer DeWolff. Under the plan provisions, he could direct the investment of his contributions. In 2004, he sued DeWolff, by then his former employer, claiming that the value of stock held in his 401(k) plan fell $150,000 because DeWolff had failed to implement certain changes he had requested in 2001 and 2002 regarding investments in his account. LaRue claimed DeWolff's omission was a breach of fiduciary breach under the Employee Retirement Income Security Act of 1974 (ERISA).

The Supreme Court case was all about whether or not LaRue had the right to sue. With the affirmative verdict, he can now present his case in civil court. It will be up to that court to decide such things as whether LaRue made his alleged investment directions in accordance with the requirements specified in his plan, whether he was required to exhaust remedies set forth in the plan before seeking relief in federal court, and whether he asserted his rights in a timely fashion, noted the S.C. decision.

The impact

"Scrutiny (for defined contribution plans) is already very intense… (since) there is someone looking over your shoulder - the Department of Labor and the Internal Revenue Service," says David Wray, president of the Profit Sharing/401(k) Council of America, a non-profit association of 1,200 companies that... (324 of 1297 words)

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