Supreme Court Expands Liability Exposure of Fiduciaries of Individual Account Plans

In a unanimous decision, the U.S. Supreme Court has held that individual participants in defined contribution plans can sue to recover losses incurred by their individual plan accounts. The long-anticipated decision in LaRue v. DeWolff, Boberg & Associates, Inc. will affect the rights and obligations of participants, sponsors, and fiduciaries of all defined contribution plans, including 401(k), profit-sharing, and employee stock ownership plans.

LaRue was a participant in the DeWolff, Boberg & Associates, Inc. 401(k) plan, a defined contribution plan that permitted participants to self-direct the investment of their contributions. The plan fiduciaries failed to follow his investment directions, and LaRue sought money damages equal to the amount by which his account had been diminished (approximately $150,000). In the district court, LaRue based his claim on ERISA § 502(a)(3), which permits participants, beneficiaries, or fiduciaries to sue to obtain appropriate equitable relief to redress violations or enforce provisions of ERISA or the plan.

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