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Friday, February 22, 2008

God Bless This Mess

On Wednesday February 20, the United States Supreme Court issued a far-reaching 9-0 verdict in the Case of Larue v DeWolff et al. This case concerned the applicability of the federal ERISA law to 401-K retirement plans. The question was whether the plan administrator had to bear fiduciary responsibility for properly executing employee instructions for changes to investments in the plan. The Court held that ERISA applied (lower courts had rejected this argument) and remanded the case back to the lower courts for re-argument and for a new verdict. There is no guarantee that LaRue will ultimately win on remand; the only guarantee is that LaRue will be able to argue that ERISA applies in his situation.

Since the nub of the original case involves a "breach of fiduciary responsibility", writers have inquired whether this case has any bearing on PERS going forward or on any cases currently under legal review. I'm not a lawyer, but it is my understanding that ERISA does not apply to public employee pension cases unless the plans have explicit 401-K options. While it might be argued that Tier 3 as well as the IAP plans are 401-K "like", they are not, in fact, 401-K plans. Thus, it is my sense that this opinion will be helpful to employers of private companies with 401-K plans, but will offer no guidance to workers hoping to litigate against Oregon's PERS system.

I tried to extract the relevant part of the Supreme Court's decision and reprint it below. Unfortunately, there was too much html to make it read clearly. Consequently, here is the link instead.

1 comment:

George said...

I'm not that familiar with ERISA, but anytime the SCOTUS takes out the Unanimous Hammer, they are sending a message, and it seems to me that maybe Judge Kantor might just read that message as well.

I see the message therein as "you can't hide behind regulation while you screw account holders". Since PERS has just announced ways to recover funds from account holders that are, to say the least, "inventive", I think that this decision might be just what Judge Kantor needs to be moved off his pedestal to issue his ruling, and include in it language and conditions which show that he recognizes the underhandedness of the PERSB.