Plan’s Investment in Employer’s Own Mutual Funds Subject to Further Scrutiny
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Plan’s Investment in Employer’s Own Mutual Funds Subject to Further Scrutiny

Two former employees filed this now-certified ERISA class action on behalf of their employer’s retirement plan (Plan) and its participants. They allege their employer breached its fiduciary duties by offering participants a range of mutual fund investments that included all of the employer's mutual funds, almost exclusively, without regard to whether they were prudent investment option, structured fees and rebates unreasonably and treated Plan participants worse than other investors in those funds. The First Circuit affirmed dismissal of the plaintiffs’ prohibited transaction, breach of loyalty and disgorgement claims. It vacated the dismissal of the prudence claim and the finding that plaintiffs failed as a matter of law to show loss ordering remand to definitively decide whether the employer breached its duty of prudence. If so, the trial court must consider whether plaintiffs demonstrated a loss to the Plan and, if so whether the employer can meet its burden of showing that the loss most likely would have occurred even if it had been prudent in its selection and monitoring procedures.

Brotherston v Putnam Investments LLC