Former Employee Can Pursue Fiduciary Suit
In a recent decision from the Ninth Circuit, a former employee was found to have legal standing to bring a suit against his former employer’s retirement plan fiduciaries even though he had already withdrawn all his assets from the plan. The main issue in the case, Harris v Amgen, Inc., is whether the company, as a named fiduciary to the plan, had breached its fiduciary duties by permitting the plan to hold Amgen stock while knowing that the stock was artificially inflated due to improper off-label drug marketing and sales. This decision does not address that issue but only whether Harris, the former employee, was entitled to bring this suit given that he had voluntarily withdrawn all his retirement plan assets.
The Ninth Circuit Court of Appeals found that a former employee who no longer has any money in the plan can still have legal standing to bring a claim alleging that a breach of fiduciary duty resulted in a reduction of benefits to the former employee. Other circuits have also found that these fiduciary claims by former employees can continue.
While this decision is most relevant to companies who have been sued by former employees regarding the prudence of holding company stock value, the “drop stock” cases, it also has relevance to all employers. The significance for all plans is that even after an employee has left the company and received a full distribution of his account, there remains the possibility that the individual could claim that improper actions by the fiduciary reduced the retirement account value. Plan sponsors should recognize this possibility and treat any communication with a former employee regarding the plan as though the individual was still an active participant.
Contact Larkin Hoffman’s Employee Benefit attorneys if you have any questions regarding this case or your company’s retirement plan.