Appeals court: Plan participants can sue

PHILADELPHIA — Defined contribution plan participants may sue to recover losses for alleged breaches of fiduciary duty, even if not all participants lost money, according to a ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia.

The three-judge panel's decision on Aug. 19 reverses a June 2004 decision by a lower court in Jingdong Zhu vs. Schering-Plough Corp., that the approximately 8,000 participants who lost more than $138 million could not sue because all plan participants had not incurred losses from the drop in the employer's stock. The participants alleged in the class-action suit that company executives should not have continued to offer the employer stock fund as an investment option when they knew that the stock price was artificially inflated.

"The fact that any proceeds may be allocated to individual participants is not relevant," said Joseph Meltzer, partner in the Radnor, Pa., law firm of Schiffrin & Barroway, which represents the participants. If Schering-Plough does not ask the appellate court for a review by all the judges, the case will be sent back to the district court to determine Schering-Plough's liability, he said.

Mr. Meltzer said the decision could influence the rehearing of Milofsky vs. American Airlines, a similar case that will be heard by the 5th U.S. Circuit Court of Appeals in New Orleans next month. The 6th U.S. Circuit Court of Appeals in Cincinnati also ruled that retirement plan participants can sue for losses, even if recovery benefits only some of the participants, he noted.

"We're disappointed with this decision, and we're exploring our options," said Rosemarie Yancosek, a spokeswoman for Schering-Plough, Kenilworth, N.J. "We still believe the case has no merits and will continue to vigorously defend ourselves."

LINCOLNSHIRE, Ill. — Hewitt Associates LLC will terminate a global profit-sharing program on Sept. 30, the end of the firm's fiscal year, said spokeswoman Kelly Zitlow. She said the firm did not make a profit-sharing contribution for the year ended Sept. 30, 2004, and it has not yet been determined if the company will make one this year.

Ms. Zitlow said terminating the profit-sharing program is part of a "broader initiative" to increase profitability and improve efficiency. Company officials expect benefit changes will save the firm about $45 million annually.

Hewitt will match the first 4% of an employee's contribution to the firm's $1.3 billion 401(k) plan, up from 2%, effective Jan. 1. The plan offers 10 investment options.

PITTSBURGH — Federated Investors will outsource its record-keeping business to Great-West Retirement Services by early 2006, said Meghan McAndrew, Federated spokeswoman. Federated will outsource 619 plans with a total of 84,500 participants representing $2.6 billion in assets, Ms. McAndrew said. Great-West has 12,000 retirement plan sponsors and 2.5 million plan participants. Ms. McAndrew said it was not yet determined what would happen to the 70 Federated employees affected by the move.

CHICAGO — Retirement plan participants were less confident in August that they are saving enough money for retirement than they were three months ago, according to a Spectrem Group survey. Of those surveyed in August, 34% expressed concern about the adequacy of their retirement savings, compared with 31% in May. Similarly, plan participants are less confident now than they were three months ago that they will have enough income to live comfortably during retirement, 61% in August vs. 63% in May.