In a highly anticipated decision, the Supreme Court recently ruled that ESOP fiduciaries are not entitled to a presumption of prudence under ERISA in connection with their decisions to buy, hold or sell the employer’s securities. While the elimination of this presumption is a loss for ESOP fiduciaries, the decision imposes additional burdens on plaintiffs that will make it easier for plan sponsors and fiduciaries to defend so-called “stock-drop” cases. It also requires plan sponsors to reevaluate plan language requiring that certain funds be invested in employer securities and to reconsider hiring an independent fiduciary to manage the employer stock fund.
Supreme Court Rejects “Presumption of Prudence,” Adopts New Pleading Standards in Fifth Third Bancorp v. Dudenhoeffer
By Wilber H. Boies, PC, Chris C. Scheithauer and Stephen Pavlick on July 15, 2014