Prior to 2014, many federal courts applied a “presumption of prudence” standard when evaluating a fiduciary’s decision to offer employer stock as an investment option under their company’s retirement plan. However, Fifth Third Bancorp v. Dudenhoeffer, drastically changed this, as the U.S. Supreme Court abolished the presumption of prudence and modified the pleading standards that plaintiffs must satisfy to state a viable claim for breach of fiduciary duty when the price of employer stock offered under a retirement plan drops. As a result of these modified pleading standards, plaintiffs face an uphill battle to bring successful claims. Nevertheless, the risk of litigation in this area persists.
This column explains the pre- and post-Dudenhoeffer legal landscape as well as considerations for plan fiduciaries as to how to reduce their fiduciary risk.