ERISA, Pension Funds & 401(k) s: The Difference Between Misleading & Outright Lying

What’s the difference between a company misleading people vs. outright lying about pension funds and 401(k) s? According to legal experts, the difference can be negligible and can often lead to lawsuits.

When must you be notified about changes?

The most common situation in a company acting as a plan fiduciary is failing to tell people about important changes to the plan, according to Ron Dean, a California attorney who has been practicing ERISA (Employee Retirement Income Security Act) law for over 35 years. He explained:

In some cases, the law doesn’t require notice for some 20 months, but good employers will tell employees right away. Other times, the plan will provide a “benefit statement” showing you how much you’ll get and through some error it’s just plain wrong. The law says that in most cases you won’t get the amount in the benefit statement no matter how much you’ve relied on it. There’s no motivation for the plan to get it right the first time. As to outright lying, sometimes (not often) we’ll see cooked books, phantom funds and just plain fraud. That’s a good time to get the Department of Labor involved. They don’t take kindly to those kinds of things.

ERISA lawsuits

We asked Dean when someone would have a lawsuit against a company for mishandling pension funds/401(k) s. Without hesitating, he told us, as soon as you learn about it. He explained whether it’s better to file an individual or class action lawsuit and how each of those works:

As a practical matter, most of those cases must be filed as class actions, because the claim is on behalf of all of the plan participants. If the mishandling only affected your account, and no one else’s, then you sue as an individual. So if you told the investment company to move your money from Fund A to Fund B and they don’t do it, you would sue as an individual. However, if the investment company was charging too much in fees for transferring, that would be a class action.

If you’ve been denied valid benefits under ERISA, consult with an experienced ERISA attorney to discuss your situation and evaluate your options. Consultations are free, without obligation and strictly confidential.