A 401(k) Plan allows employees (participants) to withhold part of their paycheck and
contribute it to a 401(k) plan. In some cases, the employer will match a certain
percentage of the employee's contributions. The contributions are made on a
before-tax basis and continue to appreciate in value (if properly invested) on a
tax-free basis until they are distributed out of the plan. Each participant maintains his
or her own account, and can receive an early distribution of his account balance (and
pay taxes) if necessary.
What kind of lawsuits arise in the administration of 401(k) Plans?
Misrepresentations to Participants. Employers that sponsor a 401(k) plan
cannot mislead participants of the 401(k) Plan with respect to their rights and benefits
under the Plan. For example, executives cannot mislead the participants of the
401(k) plan as to the value of the company stock held in the 401(k) plan. For
example, concealing an accounting fraud or potential lawsuit to artificially inflate the
company's stock value, would expose the executives to a lawsuit under ERISA.
Duty to Offer Prudent Investments. Employers that sponsor 401(k) plans
generally have a duty to monitor investment options offered to participants of the
plan. If participants purchase investments (that are offered in the plan) which incur a
significant loss in account value, then the employer may be held liable to the
participants and the plan for amounts lost because they failed to offer prudent
investments.
Delinquent Contributions. Amounts withheld from an individual's paycheck must
be contributed to the 401(k) plan no later than the 15th business day following the
month the contributions are withheld from the employee's paycheck. If the employer
fails to make these contributions in a timely manner, the employer may be liable for
lost earnings (and interest) to the participants of the plan.
Administration Failure. If the Plan Administrator (usually the employer) fails to
follow the terms of the plan, the Plan Administrator can be liable for any losses (or
lost profits) caused to the plan.
If you've had problems with your employer or your 401(k) Plan administrator with your
account balance, please Contact Us and describe your situation.
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and proper application of the complex rules that are highlighted here are properly applied.
