The Supreme Court on Monday declined to hear an appeal by participants in a class-action lawsuit against Cleveland-based KeyCorp and fiduciaries of the firm’s $1.5 billion 401(k) plan, alleging company stock was an imprudent investment.
In March, the 6th U.S. Circuit Court of Appeals in Cincinnati applied a more stringent standard for pleading stock-drop cases alleging “artificial inflation” of employee stock investments than one addressed by the Supreme Court in its June 25 decision in Fifth Third Bancorp et al. vs. Dudenhoeffer et al. In Fifth Third vs. Dudenhoeffer, an “alternative investments” case, the Supreme Court removed a presumption of prudence standard used by defined contribution plans sued for fiduciary breaches when the company stock sank.
Also Monday, the 4th U.S. Circuit Court of Appeals in Aiken, S.C., ruled that Washington Safety Management Solutions LLC must honor a supplemental benefit for early retirement that it tried to remove.
The unpublished opinion, which is not a binding precedent in the circuit, affirmed a District Court ruling that the Aiken-based firm’s termination of an early retirement pension supplement in 2004 violated anti-cutback provisions of the Employee Retirement Income Security Act, on the grounds that it was an accrued benefit. Building on a 2012 ruling by the 4th Circuit upholding a $700 monthly benefit for eligible employees, the latest ruling by Judge Roger Gregory said the anti-cutback protection also extends to workers who would not have been eligible after the amendments were made.
