At issue is whether the company, Edison, is fulfilling its fiduciary responsibility to employees participating in the 401(k) plan it administers. The suit claims that, among the plan’s investment choices, Edison offered several funds that charged excessive fees.
A potentially broader allegation in the suit is whether the plaintiffs can sue over funds that have been offered for more than the previous six years. Edison claims they cannot, in accordance with the Employee Retirement Income Security Act (ERISA) of 1974. If the U.S. Supreme Court rules in favor of the plaintiffs (or against the ERISA language), it may force companies to review their fiduciary responsibilities and make sure they are in compliance with the rapidly evolving regulatory landscape.
Even before the court agreed to hear the Edison case, a number of larger corporations (including Nationwide Financial Services, MassMutual and Lockheed Martin) reached hefty settlements over class-action lawsuits brought regarding to their own 401(k) plans. Whatever the Supreme Court’s decision, defined-contribution plans, with some $4.5 trillion in assets, are likely to see more legal challenges going forward.