No Harm, No Foul, No Lawsuit?

A pension or a defined benefit plan, is a fund wherein money is added during a worker’s employment years. After retirement, regular withdrawals from this pension are paid out periodically. Such a fund may be set up and administered by an employer, the government, employee associations, trade unions or insurance companies. Retirees look to these administrators to manage pension funds to make sure they’re available for use.

Alleging Mismanagement of Funds

The recent ruling by the US Supreme Court in the Thole vs U.S. Bank decision may surprise you when it comes to the ability of a plaintiff to sue pension administrators for funds mismanagement. In this case, the U.S. Bank was sued by two plaintiffs for investing funds into high-risk equities and collecting exorbitant management fees, violating the Employee Retirement Income Security Act (ERISA). After the lawsuit was brought forth, the U.S. Bank contributed millions to the plan, which became fully funded. The case was dismissed by the Court who ruled that since the plaintiffs had not lost any money or benefits, they had no case.

Understanding the Implications

Per the Court, plaintiffs must have experienced a “concrete injury”  before suing a defined benefit pension plan administrator. The Court’s decision was not at all based on the actual funding status of the plan. This would not seem to apply to retirement plans such as 401ks which are defined contribution plans where benefits are directly tied to administrators’ investment decisions.