ERISA Attorneys — Retirement Plan Investment Claims
What is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) is the federal law governing employer-sponsored retirement plans — including 401(k) plans, 403(b) plans, pension plans, profit-sharing plans, and other qualified retirement plans. ERISA imposes strict fiduciary obligations on plan administrators, investment committees, and other plan fiduciaries — and provides legal remedies for plan participants and beneficiaries when those obligations are breached.
ERISA fiduciary duties are among the highest standards in American law. Plan fiduciaries must act solely in the interest of plan participants and beneficiaries, must act prudently in selecting and monitoring investments, must diversify plan investments to minimize the risk of large losses, and must follow the terms of the plan document. Violations of these duties — including selecting imprudent investment options, failing to monitor investment performance, maintaining excessive fee arrangements, and engaging in prohibited transactions — are actionable under Section 502.
Common ERISA investment claims
Imprudent investment selection
Plan fiduciaries have an obligation to select and maintain only prudent investment options for plan participants. When a plan’s investment menu includes underperforming, excessively expensive, or structurally unsound investment options — and the plan committee failed to conduct adequate due diligence — participants who suffered losses in those options may have claims for breach of the duty of prudence.
Excessive fee claims
ERISA requires plan fiduciaries to ensure that plan expenses are reasonable. When a plan pays excessive fees — including excessive recordkeeping fees, revenue sharing arrangements that benefit plan service providers at participants’ expense, or high-cost retail share classes when lower-cost institutional share classes were available — participants may bring ERISA claims for breach of fiduciary duty. Excessive fee litigation has been one of the most active areas of ERISA enforcement over the past decade.
Company stock overconcentration
Some employer-sponsored retirement plans offer company stock as an investment option — and some plans require that employer matching contributions be made in company stock. When the employer’s financial condition deteriorates and the plan continues to hold company stock, participants can suffer catastrophic losses. ERISA provides specific rules governing employer stock in retirement plans, and plan fiduciaries may be liable when they fail to monitor company stock holdings prudently.
Prohibited transactions
Section 406 prohibits certain transactions between a plan and parties in interest — including plan sponsors, service providers, and their affiliates — unless a specific exemption applies. When a plan enters into a prohibited transaction — such as paying excessive fees to a service provider affiliated with the plan sponsor — plan fiduciaries may be personally liable for resulting losses.
Rollover mismanagement
When a plan participant rolls over retirement assets from an ERISA plan to an IRA, the financial professional who receives the rollover and recommends investments is subject to ERISA fiduciary standards for that transaction. Unsuitable investment recommendations at rollover — including recommending high-commission variable annuities or complex alternative investments for rolled-over retirement assets — may give rise to both ERISA claims and FINRA arbitration claims.
ERISA litigation — how claims are brought
ERISA claims are brought in federal court rather than FINRA arbitration — ERISA explicitly provides for federal court jurisdiction and prohibits arbitration of certain plan-level claims. Individual participants may bring claims on behalf of themselves and, in some cases, on behalf of the plan as a whole in class action proceedings.
ERISA class actions involving large retirement plans — 401(k) plans with thousands of participants — are among the most significant employee benefits cases in federal court. Bakhtiari & Harrison evaluates ERISA claims both for individual participants with significant individual losses and for plan-level class actions involving systematic fiduciary breaches affecting all plan participants.
ERISA and FINRA arbitration — when both apply
In some circumstances, an ERISA claim and a FINRA arbitration claim can arise from the same underlying misconduct — particularly when the misconduct involves a financial adviser who recommended unsuitable investments for rolled-over retirement assets or an IRA. Bakhtiari & Harrison evaluates the full range of available claims and recommends the combination of ERISA litigation and FINRA arbitration that is most likely to maximize recovery for the specific client’s situation. For more on FINRA arbitration claims visit the Securities Arbitration page.
Frequently asked questions — ERISA
Can I sue my employer for losses in my 401(k) plan?
Possibly — if the losses were caused by a breach of fiduciary duty by the plan’s investment committee or administrator. Simply losing money in a 401(k) plan is not itself an ERISA violation — markets decline and investment returns are not guaranteed. An ERISA claim arises when the losses were caused by an imprudent investment decision, excessive fees, company stock overconcentration, or another fiduciary breach. Bakhtiari & Harrison evaluates potential ERISA claims at no charge.
What is the statute of limitations for an ERISA claim?
ERISA Section 413 provides a six-year statute of limitations from the date of the last action constituting the breach, or three years from the earliest date the plaintiff had actual knowledge of the breach — whichever is earlier. In cases of fraud or concealment, the limitations period is six years from the date of discovery. ERISA limitations periods are strictly enforced — contact Bakhtiari & Harrison promptly if you suspect a fiduciary breach.
Can I bring an ERISA class action?
Yes. ERISA explicitly authorizes plan participants to bring claims on behalf of the plan — meaning that a single participant can bring a claim that benefits all plan participants. ERISA class actions involving large plans with many participants and significant assets are among the most impactful employee benefits cases in federal court. Bakhtiari & Harrison evaluates ERISA class action potential as part of every ERISA claim assessment.
My financial adviser recommended I roll my 401(k) into an annuity — do I have a claim?
Possibly. Advisers who recommend retirement account rollovers are subject to a fiduciary standard for that recommendation. If the annuity was unsuitable for your retirement situation — because of excessive surrender charges, high fees, or characteristics inconsistent with your retirement income needs — you may have both an ERISA claim and a FINRA arbitration claim. Bakhtiari & Harrison evaluates rollover mismanagement claims at no charge.
For a full overview of the firm’s financial professional representation practice, visit the Registered Persons page.
What is an ERISA Fiduciary?
ERISA requires that a fiduciary act “solely in the interest of the plan’s participants and beneficiaries,” for the “exclusive purpose” of providing plan benefits and defraying reasonable administrative expenses, and with the care, skill, prudence, and diligence of a similarly situated prudent person. The act also requires fiduciaries to diversify plan investments and, to comply with plan documents to the extent that they are compliant. ERISA fiduciaries have a responsibility to manage.
A fiduciary who commits a breach of any fiduciary duty can be held liable for any loss to the plan that results from such breach, plus a civil penalty of 20 percent of such loss. The Supreme Court has ruled that courts may award damages to participants in fiduciary breach actions under certain circumstances. The defalcating fiduciary also may be removed from her position as a fiduciary.
Contact an ERISA attorney — free consultation
Contact Bakhtiari & Harrison for a free, confidential consultation. Our FINRA attorneys review every potential matter at no charge. Financial professional cases are handled on a flat fee or hourly basis.
Financial professional cases are handled on a flat fee or hourly basis. Initial consultations are free.
Call: (800) 382-7969 | Contact Us