The Supreme Court struggled with the changed world of retirement plans Monday, trying to decide whether a worker has a right to sue to recover losses when his instructions on where to invest his retirement money are disregarded.
The justices debated the case of James LaRue, who says he lost $150,000 in a market downturn when administrators at his 401(k) retirement plan twice failed to carry out his requests to sell stocks and move his money into safer investments.
Allowing LaRue to seek recovery of the money under a federal pension reform law would result in "no end to the kind of claims one could imagine," Washington attorney Thomas Gies told the justices. "We think Congress did not want those kinds of claims."
Unlike traditional pension plans, participants in 401(k) plans select from a menu of choices as to where their money is to be invested.
Justices Stephen Breyer, Ruth Bader Ginsburg and David Souter seemed sympathetic to LaRue's argument that the Employee Retirement Income Security Act enables him to seek recovery of his alleged losses through the federal courts.
Gies suggested that LaRue "could have picked up the phone" or sought a court order directing that his instruction be carried out.
Ginsburg pointed to LaRue's argument that many months passed before he became aware plan administrators had twice not carried out his investment instructions.
By the time LaRue realized what had happened, "it's over and done with," Ginsburg said.
Chief Justice John Roberts and Justices Antonin Scalia and Samuel Alito seemed concerned that opening the door to LaRue's lawsuit under ERISA could hurt the other investors in a 401(k) plan.
Any recovered money would not come from other account holders, but rather from fiduciaries overseeing the plans, LaRue's attorney and a lawyer representing the Bush administration told the court.
The case is LaRue v. DeWolff, Boberg & Associates Inc; and DeWolff, Boberg & Associates Inc., Employees' Savings Plan, 06-856.
