Supreme Court Decision Authorizing Suits by Individual 401(k) Plan Participants Based on “Impaired Value” of Plan Accounts Confirms Yet Another Risk for Plan Fiduciaries

February 25, 2008
In LaRue v. DeWolff, Boberg & Associates, Inc., No. 06-856, 552 U.S. ____ (February 20, 2008), the U.S. Supreme Court unanimously held that ERISA “authorizes a participant in a defined contribution pension plan to sue a fiduciary whose alleged misconduct impaired the value of plan assets in the participant’s individual account.” Because LaRue sought only to recover the benefits that would allegedly have been due to him absent a fiduciary duty breach, the Court held the relief sought by LaRue constituted appropriate relief under § 409, and his action pursuant to § 502(a)(2) was permissible. However, two Justices, including Chief Justice Roberts, indicated that it was unclear whether the relief sought was appropriate under § 502(a)(2). Roberts noted that allowing a claim such as LaRue’s to be “recast as one under § 502(a)(2) might permit plaintiffs to circumvent safeguards for plan administrators.” Plan sponsors and fiduciaries should monitor the extent to which Chief Justice Roberts’ comments regarding the impermissibility of recasting claims for benefits as claims for breach of fiduciary duty will be emphasized by lower courts. This article discusses this case and the various rationales for its decision.