Likely the most powerful court decision so far this year involving the Employee Retirement Income Security Act (ERISA), the U.S. Court of Appeals for the Eighth Circuit found that employers of a technologies company breached a fiduciary duty to take action to protect employees’ 401(k) plans from hidden fees that, as The New York Times has reported, can significantly harm workers’ retirements.
In the case, Tussey v. ABB, Inc., a three-judge panel of Eighth Circuit largely agreed with a lower court opinion that the technologies company mishandled their employees’ 401(k), breaching fiduciary duties as detailed in ERISA.
Writing for the majority opinion, Chief Judge William Jay Riley, citing 8th Circuit precedent, wrote that ERISA “imposes upon fiduciaries twin duties of loyalty and prudence, requiring them to act ‘solely in the interest of [plan] participants and beneficiaries’ and to carry out their duties ‘with 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 like character and with like aims.’”
Reporting for The New York Times, Gretchen Morgenson, wrote that the “significance of this ruling extends far beyond ABB. It sends a powerful message to plan sponsors everywhere: if you think you’ve done your fiduciary duty simply by offering low-cost funds as investment options, think again.”
In late May, the entire 8th Circuit refused to rehear the three-judge panel’s ruling in Tussey. The Tussey opinion is available here.