Supreme Court Decision in Stock Drop Case: Are Fiduciaries Now Vulnerable or Bulletproof?

12 August 2014
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Key takeaways:

  • The Supreme Court recently rejected the long and widely accepted axiom that fiduciaries of retirement plans that invest primarily in the stock of the participants’ employer (ESOPs) and other defined contribution plans offering employer stock as an investment option are entitled to a “presumption of prudence” under the ERISA, when causing the plan to invest in employer stock.
  • Although the Supreme Court rejected the presumption, the Supreme Court established a new, higher burden of proof for claims and provided plan fiduciaries with important new defenses. Did the Supreme Court simply replace the fiduciaries’ shield of presumed prudence with the club of an insurmountable burden of proof?
  • This client alert discusses the case and the steps that plan fiduciaries should take to defend themselves against claims pending further developments on the question.