Can You Sue Your 401(k)?

[RamboLiberal]

Source: CBS News

James LaRue says he lost $150,000 when his instructions to his employer on where to invest money in his retirement plan were ignored.

Now the Supreme Court will decide whether a federal pension-protection law gives LaRue the right to sue to recover his losses. Arguments in the case, which has far-reaching consequences, were scheduled for Monday.

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LaRue says that in 2000 and 2001 he requested changes in his investment allocations in mutual funds that were available to participants in his company's 401(k) plan. He says the requests were not honored.

"I wanted to sell stocks and move to cash because I thought the market would head down. I was right," LaRue said in a telephone interview. "I didn't find out that the plan had not executed my transactions until 10 months later. They had a substandard reporting system. I left the firm. I asked them again to make the change, and they still didn't do it. I don't know why."

The Bush administration, siding with LaRue, says an appeals court ruling against him would leave participants in "the most common form of pension plan who have been injured by a breach of fiduciary duty without a meaningful remedy from any court."

Read more: http://www.cbsnews.com/stories/2007/11/25/business/main3537894.shtml

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Whoa, one of the few times I agree with the Bush Administration.

[Scooter24]

1. This is an interesting case

"Business groups assign a different motive to the long delay in filing the second suit, saying LaRue was waiting to see how the market performed. If the value of his investment went up, he made money. If it went down, he would head to court."

I can see both sides of the issue, but given that his instructions were ignored, I would think that would take precedent here. But, the question also arises, if such a mistake occurred, and an individual profited from the mistake, could the company or bank reclaim the difference?

Would be an interesting case to watch

[Yupster]

2. Normally in this type of case

it would go to arbitration.

Brokerage firms carry "Errors and Omissions" Insurance to coiver situations like this where the broker or company failed to due a trade due to an error or omission.

Generally each person gets a statement at least quarterly, sometimes monthly. The investor would be expected to explain why it took him ten months to notice the omission.

I don't know if the account being a 401 (k) makes the process significantly different from a normal brokerage account.

[michreject]

3. WOW!!!!!!!!!!!!!!!!!!

What an idiot. He didn't check on his holdings for 10 months. Didn't he read his statements? I predict he'll lose this.

[lonestarnot]

4. What about fiduciary duty! He had reasonable expectations for the account to be managed according

to his wishes! They have to much fucking control over 401K money.

[michreject]

5. Both have a responsibility

And he shirked his.

When I moved my money around, I checked within days t see if it had been done.

[noamnety]

6. blame the victim

I don't usually see that used in this context, but it does appear to be what you're doing.

He had a contractually agreement with the company managing the 401k. They screwed up, and didn't abide by their responsibilities. That makes them liable for damages.

Unless the contract says he has to check and report errors within a certain number of days in order to get them corrected, I think that's irrelevant to the case.

[michreject]

7. Blame everyone but himself for his own errors

He had gotten at least three statement since the requested change. Did he not read them? If it were my money, I would be watching it like a hawk.

Sorry. No one to blame but himself.

[noamnety]

8. Kinda like rape victims?

They shouldn't have been out at night, they shouldn't have been dressed that way, and therefore the person who actually committed the crime (or didn't abide by their legal obligations) is absolved of all guilt?

The company had a legal obligation to make the transfer. He did not have a legal obligation to read each statement (unless the company put that in his contract).

Your personal thoughts on whether he should have watched his statements like a hawk in anticipation of them screwing up are not relevant to the LEGAL responsibilities of each party.

That's kinda like how men have a legal obligation not to rape women. Women do not have a legal obligation to stay in their house after dark, or to wear long sleeve shirts and long pants that aren't too clingy. He put himself in a riskier spot by not checking the statements, but exposing oneself to risk doesn't mean the other party no longer has legal obligations and can break the contract at will.

If I hire someone to reroof my house, and I find out 10 months later they didn't put the shingles on right, and I get water damage as a result, they're liable for the damages. Even if you think I should have gone up on the roof and inspected their work, I have the right to presume they did their job in a competent way. If they were incompetent, they have to make amends.

[michreject]

11. Not even close

Nice straw man.

If you believe that no one should be responsible for their own actions or inactions, that fine. I'm not one of them.

[noamnety]

14. Some people think

corporations are responsible for upholding their end of a contract, and liable for damages if they are at fault.

Are you one of those people?

[IdaBriggs]

10. You assume he received statements.

From the original posting, quoting the guy who is suing:

"I didn't find out that the plan had not executed my transactions until 10 months later. They had a substandard reporting system."

If you read the article, it tells that he had already taken them to court once and won, tried to settle this (separate) case, but couldn't because they wouldn't deal with the reality THEY HAD SCREWED UP TWICE, and finally took them to court AGAIN. At issue isn't just this guy's problem, but also whether or not anyone in a 401(k) program has a right to sue if the funds are mis-managed -- not in an "error or omissions way" but as in, "we are incompetent and don't do what we are supposed to do." In my opinion, that would include things like "not sending out statements for nearly a year" and "not doing what our investors tell us to" which would be a reasonable basis for a lawsuit.

[michreject]

12. I totally agree with you

I think that there has to be more to this than's be told.

[Turbineguy]

9. A friend

had his IRA invested with (a company). He decided to change to a new company and wrote to all concerned and gave specific instructions on how to invest the money. The first company, not wanting to lose the account, stonewalled. In the meantime, the investments he had instructed the new company to make went up quite a bit. He sued and won and the first company had to give him the higher value.

On edit: My friend followed up on his instructions within a week.

[Xenotime]

13. This guy should get his money back with interest