PLANSPONSOR.com reports on a key 401(k) fiduciary breach case (free registration required) that is scheduled for Supreme Court Session beginning October, 2007. The case (LaRue v. DeWolff, Boberg & Associates, U.S., No. 06-856) will determine if 401(k) participants can sue to restore their account balance when a fiduciary breach results in lost money. Lower courts ruled that recovering those funds falls outside of the scope of "equitable relief" authorized by ERISA.

If overturned, plan sponsors could be facing significant liability without strict fiduciary controls and a well defined and carefully followed Investment Policy Statement.

Let’s look at the key points:

• The U. S. Supreme Court “will decide” whether participants can sue to restore their account balances when a “fiduciary breach” caused them to lose money. Think ENRON!
• The U. S. Solicitor General stated in legal briefs filed with the court that: “It makes little sense that plans and their participants should be left with no relief when plan assets are lost through fiduciary mismanagement.” This puts all fiduciaries and co-fiduciaries on notice that they will, if the court rules in favor, have to “put their money where their investments are.”