LaRue v. DeWolff, Boberg & Associates, Inc.
The Supreme Court ruled that a worker in a 401(k)-style retirement plan can sue a plan administrator under ERISA for mismanagement that reduced the value of his individual account, even though the harm hit only his account and not the plan as a whole.
The decision updates a 1985 ruling written for old-style pensions that promised a fixed benefit, recognizing that today's individual-account retirement plans work differently and that losses to one person's account are still losses the law was designed to prevent.
“We therefore hold that although § 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account.”
The Court's core holding extending ERISA fiduciary-breach suits to 401(k) individual accounts.
How it got here: A federal trial court dismissed the worker's fiduciary-breach claim, the Fourth Circuit affirmed, and the Supreme Court agreed to review the case.
The Case in Depth
What happened
A retirement-plan participant told his employer's 401(k) plan to change how his contributions were invested. The plan never carried out those instructions, and he says that failure cost his individual account about $150,000. He sued his former employer and the plan, claiming the failure to follow his directions was a breach of the fiduciary duties that federal pension law imposes on people who manage retirement plans.
The question before the Court
If mismanagement of a 401(k) plan drains money from just one worker's individual account, can that worker sue under the federal pension law?
Why it matters
Tens of millions of workers now save for retirement through 401(k)-style plans where their benefit depends entirely on what's in their own account. This ruling means those workers have a clear path to sue plan administrators who mishandle their individual investment instructions or otherwise mismanage their account, not just claims affecting the whole plan.
What changes now
The Fourth Circuit's ruling against the worker is undone, and the case goes back to the lower courts to proceed on the merits of his fiduciary-breach claim. The Court did not decide whether the worker actually proved a breach, whether the plan required him to exhaust internal remedies first, or whether his separate claim for benefits under a different ERISA provision might apply instead — those issues remain open for the lower courts.
What this does not decide
The Court did not decide whether the worker actually followed the plan's required procedures, whether he needed to exhaust plan remedies before suing, or whether his claim should instead have been brought as an ordinary claim for benefits under a different ERISA provision — an argument the Chief Justice's concurrence flagged as unresolved.
Concurrences and dissents
Concurrence in part — Justice Roberts
Chief Justice Roberts agreed that the Fourth Circuit's reasoning was wrong but questioned whether the majority needed to decide that this kind of claim belongs under § 502(a)(2) at all. He argued the claim looks like an ordinary benefits claim that properly belongs under a different ERISA provision, § 502(a)(1)(B), which comes with safeguards for plan administrators like exhaustion requirements and deferential review. He stressed the Court left that question open for the lower courts.
Concurrence — Justice Thomas
Justice Thomas agreed with the outcome but rejected the majority's reasoning based on changing pension-plan trends and congressional concerns. He argued the plain text of §§ 409(a) and 502(a)(2) alone settles the case: since a defined-contribution plan's assets are simply the sum of all individual accounts, losses to one account are automatically losses 'to the plan' under the statute's text.
How the Court got there
The legal reasoning, step by step
- The Court examined ERISA § 409(a), which makes fiduciaries personally liable for losses 'to the plan' caused by their breaches, and § 502(a)(2), the provision letting participants sue to enforce that liability.
- The Court distinguished this case from its 1985 ruling in Russell, which involved an old-style pension that promised a fixed dollar benefit regardless of the plan's investment performance; there, mismanagement only mattered if it threatened the whole plan's ability to pay everyone, so the Court had emphasized recovery for the 'entire plan.'
- By contrast, in a defined-contribution plan like a 401(k), each participant's payout depends directly on what happens in that person's own account, so mismanagement of a single account creates exactly the kind of harm to plan assets that the fiduciary-duty provisions were written to prevent.
- The Court found support in a separate ERISA provision, § 404(c), which shields fiduciaries from liability for losses caused by a participant's own investment choices — a rule that would serve no purpose if fiduciaries could never be liable for losses in an individual account in the first place.
- The Court concluded that § 502(a)(2) does not create a separate remedy for purely personal injuries apart from the plan, but it does let a participant recover when a fiduciary breach reduces the assets credited to that participant's individual account.
Doctrinal impact
Cases affected by this decision
Limits Massachusetts Mut. Life Ins. Co. v. Russell (473 U. S. 134)
Confines Russell's 'entire plan' language to old-style fixed-benefit pensions, not modern individual-account plans.