401(k) Plan Sponsors Targeted for ERISA Lawsuits

Most law firms are not large enough to have a full-time employee tasked with managing the firm's benefits. Responsibility can lay in the hands of a partner, an administrative employee, or a third party. Chances are that managing the 401k plan will fall relatively low on the list of priorities. Many firms will set up a plan with the assistance of a vendor, enroll the employees, and rarely think about plan administration, assuming all is well. Up until two years ago, taking such a laissez-faire approach, while not necessarily prudent, was unlikely to result in a lawsuit because employees could not file suit under ERISA for losses related to their individual accounts. This principle changed with the Supreme Court's decision in Larue v. DeWolff, holding 401k plan participants have a cause of action under ERISA to sue for individual, as opposed to planwide, losses. To this end, law firms need to take a close look at who the fiduciaries are with respect to their plan, and how the plan is being managed. This is particularly true in partnerships where one partner's conduct can result in liability for others.