Retirement Plan Losses May Be Able To Be Recovered
Retirement Plan Losses May Be Able To Be Recovered
Many pension funds throughout the country have been
victimized by the unethical practices of corporations,
stockbrokers and brokerage houses. Pension funds and their
trustees have an important role in ensuring the securities
that invested are appropriate for that plan.
The fiduciary obligations of trustees also make it vital
that actions be taken to recover losses due to securities
fraud. Additionally individuals who have lost their
retirement benefits, or whose plan value has significantly
declined, may have causes for legal action.
The Employee Retirement Income Security Act of 1974 (ERISA)
protects the assets of the American public to ensure funds
placed in retirement plans will be available to them when
they retire. ERISA is a federal law that sets minimum
standards for pension plans in private industry. Most of
the provisions of ERISA are effective for plan years
beginning on or after January 1, 1975. ERISA requires that
companies who establish plans must meet certain minimum
standards. The law generally does not however specify how
much money a participant must be paid as a benefit.
In general, ERISA does the following:
* Requires plans to provide participants with information
about the plan including important information about plan
features and funding. The plan administrators must furnish
important facts about the plan regularly and automatically.
* Sets minimum standards for participation, vesting,
benefit accrual and funding. The law defines how long a
person may be required to work before becoming eligible to
participate in a plan, to accumulate benefits, and to have
a non-forfeitable right to those benefits. The law also
establishes detailed funding rules that require plan
sponsors to provide adequate funding for your plan.
* Requires accountability of plan fiduciaries. Defines a
fiduciary as anyone who exercises discretionary authority
or control over a plan's management or assets, including
anyone who provides investment advice to the plan.
Fiduciaries that do not follow the principles of conduct
may be held responsible for restoring losses to the plan.
* Gives participants the right to sue for benefits and
breaches of fiduciary duty.
* Guarantees payment of certain benefits if a defined plan
is terminated, through a federally chartered corporation,
known as the Pension Benefit Guaranty Corporation (PBGC).
Under the requirements to provide information one of the
most important documents a participant must receive
automatically when becoming a member of an ERISA-covered
pension plan or a beneficiary receiving benefits under such
a plan, is a summary of the plan (SPD). The plan
administrator is legally obligated to provide this
document. If a plan is changed the participant must be
informed, through a revised SPD, or in a separate document,
called a summary of material modifications.
ERISA protects plans from mismanagement and the misuse of
assets through its fiduciary provisions. ERISA defines a
fiduciary as anyone who exercises discretionary control or
authority over plan management or plan assets, anyone with
discretionary authority or responsibility for the
administration of a plan, or anyone who provides investment
advice to a plan for compensation or has any authority or
responsibility to do so. Plan fiduciaries include, for
example, plan trustees, plan administrators, and members of
a plan's investment committee.
The primary responsibility of fiduciaries is to run the
plan solely in the interest of participants and
beneficiaries and for the exclusive purpose of providing
benefits and paying plan expenses.
Fiduciaries must act prudently and must diversify the
plan's investments in order to minimize the risk of large
losses. In addition, they must follow the terms of plan
documents to the extent that the plan terms are consistent
with ERISA. They also must avoid conflicts on behalf of the
plan that benefit parties related to the plan, such as
other fiduciaries, service providers, or the plan sponsor.
Fiduciaries that do not follow these principles of conduct
may be personally liable to restore any losses to the plan,
or to restore any profits made through improper use of plan
assets. Legal action may follow against fiduciaries that
breach their duties under ERISA including their removal and
potential criminal prosecution.
ERISA civil violations examples:
* Failing to operate the plan prudently and for the
exclusive benefit of participants.
* Using plan assets to benefit certain related parties to
the plan, including the plan administrator, the plan
sponsor, and parties related to these individuals.
* Failing to properly value plan assets at their current
fair market value, or to hold plan assets in trust.
* Failing to follow the terms of the plan (unless
inconsistent with ERISA).
* Failing to properly select and monitor service providers.
Taking any adverse action against a participant for
exercising their rights under the plan.
The Department of Labor (DOL) enforces Title I of the
Employee Retirement Income Security Act (ERISA), which, in
part, establishes participants' rights and fiduciaries'
duties. The DOL's Employee Benefits Security Administration
(EBSA) is the agency charged with enforcing the rules
governing the conduct of plan managers, investment of plan
assets, reporting and disclosure of plan information,
enforcement of the fiduciary provisions of the law, and
workers' benefit rights.
If an employer declares bankruptcy, there are a number of
choices as to what form the bankruptcy takes. A Chapter 11
(reorganization) bankruptcy may not have any effect on a
pension plan and the plan may continue to exist. A Chapter
7 (final) bankruptcy, where the employer's company ceases
to exist, is a more complicated matter.
About the Author:
Individuals who have been victimized by an investor may
have the ability to seek legal action for thier loss, visit
retirement.legalview.com/ . Also, browse LegalView's
other legal issues including the most up-to-date news on
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