Supreme Court ruling permits employees to sue over 401(k) losses

The United States Supreme Court upheld the right of employees to sue over losses in their 401(k) retirement plan accounts. Employers -- or whoever they appoint in their stead -- have an established obligation to run retirement plans as "prudent experts" on behalf of participants.

At issue in the case before the Supreme Court was whether federal pension law, which allows lawsuits on behalf of a group of employees, also allows an individual to sue over losses in his own account in a 401(k) or similar plan.

Previous case law allowed participants to sue employers over losses on behalf of the retirement plan as a whole. But the prior ruling had arisen in traditional pension plans, in which assets are invested collectively. Employers have argued that participants couldn't file the same kind of suit over losses in 401(k)s and other individual accounts because they didn't represent losses to the plan itself.

In Wednesday's decision, the court disagreed. The majority opinion, by Justice John Paul Stevens, said pension law "does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account." A concurring opinion by Justice Clarence Thomas, joined by Justice Antonin Scalia, said losses to an individual's account were effectively losses for the plan as a whole.