Benefits & ERISA Law

Will LaRue Actually Lead to An Increase in Litigation?

I thought I would pass along today this article from Business Insurance in which I am interviewed about LaRue, and its impact on plan sponsors. The point of the article is that the decision opens them up to more potential liability, and they need to be aware of that. I am actually a little bit agnostic as to how much this ruling will increase litigation over these types of cases, given the expense and difficulty of litigating these types of cases if you are a participant. Probably for practical reasons - because I could, and probably did in the interview, go on at length about this topic - the article doesn’t contain all of my comments on this point. The gist of my thoughts on the issue, however, is that, as a practical matter, LaRue lowers the financial bar for suits over problems in 401(k) plans and makes it more likely that smaller company plans may be sued for the types of errors - such as excessive fees, company stock, and the like - that big plans get sued over. This is because these types of claims have predominately been brought so far on a class wide basis by class action plaintiff firms. As a result, only larger sponsors with large possible exposures were really in the cross hairs for these types of defects in 401(k) plans, because that is who the class action bar targets; LaRue, by at least establishing the right of participants to bring suits over these same issues only on their own behalf lowers the bar and provides an avenue for much smaller suits over these types of issues. This puts smaller company plans in the line of fire for suits over these issues, because while they may not have sufficient assets to attract the interest of the class action bar, they still have enough assets to attract lawsuits from their own participants.

Full post as published by Boston ERISA Law Blog on February 29, 2008 (boomark / email).