WASHINGTON — The Supreme Court ruled Wednesday that individual participants in the most common type of retirement plan can sue under a pension protection law to recover their losses.
The unanimous decision has implications for 50 million workers with $2.7 trillion invested in 401(k) retirement plans.
James LaRue of Southlake, Texas, said the value of his stock market holdings plunged $150,000 when administrators at his retirement plan failed to follow his instructions to switch to safer investments.
The issue in the LaRue case was whether the Employee Retirement Income Security Act permits an individual account holder to sue plan administrators for breaching their fiduciary duties.
The language of the law refers to recovering money for the “plan” rather than for an individual, raising the question of whether a participant can sue solely for himself.
Justice John Paul Stevens, in his opinion for the court, said that such lawsuits are allowed.
“Fiduciary misconduct need not threaten the solvency of the entire plan to reduce benefits below the amount that participants would otherwise receive,” Stevens said.
The decision overturned a ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Va.
Unlike people enrolled in traditional pension plans, employees in 401(k) plans, which have exploded in number in the past two decades, choose from a menu of options on where to invest their money.
That puts workers squarely in the middle of decisionmaking about their pensions and inevitably leads to the kind of disputes LaRue has with his plan’s administrators.
Also Wednesday, the Supreme Court:
• Made it harder for consumers to sue makers of federally approved medical devices, ruling 8-1 against the estate of a patient who suffered serious injuries when a catheter burst during a medical procedure.
• Invalidated parts of Maine’s law barring Internet tobacco sales to minors, saying in a unanimous decision that the state cannot impose a regulatory scheme on transportation companies making door-to-door deliveries of tobacco products to consumers.
• Ruled 8-1 against the star of the syndicated TV show “Judge Alex,” saying that an arbitrator must decide the judge’s fee dispute with an attorney who is claiming 12 percent of “Judge Alex’s” earnings.
• Decided 7-2 that state courts may apply the Supreme Court’s rulings to old cases, opening the way for an imprisoned child sexual abuser to challenge his conviction.
