The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to, among other things, protect the assets of private employer pension plans. The federal law sets minimum standards for most voluntarily established pension and health plans in the private industry. Its purpose is to protect individuals in these plans.

Depending on a person’s role or function within a benefit plan, a person may be classified as an ERISA fiduciary. ERISA holds such a fiduciary to a “prudent person” standard. This is to say that plan fiduciaries are to act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”

Under ERISA, the plan administrator must provide participants with information about the plan’s features and funding. The information must be conveyed in such a way that employees understand their benefits and their rights under benefit plans.

 Furthermore, trustees, administrators, and members of the plan’s investment committee must act in the best interests of the plan’s participants and beneficiaries. This includes making prudent investments and diversifying the plan’s investment portfolio. High-return, high-risk investments are inappropriate for an ERISA plan. Instead, the fiduciaries have a duty to earn steady returns through safe, well-informed investments.

Plan beneficiaries can sue employers or plan managers if their pension fund is not appropriately managed, or the managers of the plan’s assets violate their fiduciary duties.

Fiduciaries of 401(k) and 403(b) plans breach their duties of loyalty and prudence in the following ways:

  • Failing to review plan portfolios objectively and adequately to make sure that each investment option is justifiable and properly takes costs into consideration
  • Retaining investment options, like mutual funds, even when less expensive and identical or similar investment options are available, possibly with better performance histories
  • Failing to select the lowest cost share class for funds within the plan
  • Failing to consider collective investment trusts, commingled accounts or separate accounts as alternatives to mutual funds, despite their lower fees
  • Failing to obtain competitive bids for administrative services for the plan, like recordkeeping
  • Using more than one recordkeeper for a plan, which subjects the plan and its participants to unnecessary and duplicative expenses
  • Engaging in prohibited transactions with plan assets
  • Continuing to offer company stock as an investment option when the plan sponsor knows or recklessly disregards the fact that the price of the company’s shares is artificially inflated as a result of the company’s false and misleading statements and/or material omissions concerning the company’s financial results and future prospects

If you believe that you may have a claim under ERISA, you can discuss your case with our experienced ERISA class action lawyers at Shub Law by scheduling a free, confidential consultation. Please contact us via email at or give us a call at (856) 772-7200. Don’t sit on your rights!


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