Rights of Individual Plan-Holders Expanded By Sixth Circuit; Rights of Individual Top Executives Reigned In By First Circuit

Recent Court of Appeals decisions grapple with individuals in a Plan context

A recent Sixth Circuit decision has opened the courtroom doors to individual participants harmed by a Plan Fiduciary’s breach of fiduciary duty by eliminating a previous requirement that individual plan participants sue on behalf of the entire plan, rather than only for their individual losses. In Tullis v. UMB Bank, the Sixth Circuit granted standing to two physicians who were defrauded of almost $1.8 million by their plan’s investment advisor when the fiduciary continued to employ an advisor who made improper trades and failed to make trades, even after the SEC suspended the investment company’s ability to operate.

In allowing the individual suits to go forward, the Sixth Circuit has removed a Plan’s first line of defense in protecting itself against ERISA violation claims. Click here to read the full article.

In contrast, a First Circuit decision demonstrated that a “top hat” excess compensation plan is still exempt under ERISA, even when the individual executives are not given an opportunity to negotiate the terms of their pension packages, and do not have individual bargaining power. In Alexander v. Brigham and Women’s Physicians Organization, Inc., the First Circuit broke with other federal circuits in approving a Plan’s seizure of more than $400,000 from a Massachusetts surgeon’s deferred compensation account after terminating him. Click here to read the full article.

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