On Monday, in a 5-4 decision, the Supreme Court of the United States ruled that plan participants of defined benefit plans not underfunded do not have legal standing to sue plan fiduciaries for claims of mismanagement. The ERISA case in question, Thole vs. U.S. Bank, was dismissed after the 8th U.S. Circuit Court of Appeals and a lower court claimed plan participants did not suffer individual financial consequences and there were enough plan assets to cover benefits. Plan Participants in the U.S. Bancorp Pension Plan stated that plan fiduciaries failed to diversify investments, engaged in misconduct, and invested in high-risk equities like a proprietary mutual fund, resulting in $750 million in losses. Subsequently, the U.S. Bank replaced those quantities, resulting in overfunding for the plan.
Writing the dissent, Associate Justice Sonia Sotomayor said: “The Court holds that the Constitution prevents millions of pensioners from enforcing their rights to prudent and loyal management of their retirement trusts. Indeed, the Court determines that pensioners may not bring a federal lawsuit to stop or cure retirement-plan mismanagement until their pensions are on the verge of default. This conclusion conflicts with common sense and longstanding precedent.”
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