ERISA Supreme Court Cert. Petition Filed in Individual Account Plan Case

Thanks to reader Andrew Hartley who brings to our attention a cert. petition that he and co-counsel filed in the the 9th Circuit case of Coates v. Agilent Technologies, Inc.  The petition asks the Supreme Court to take up two issues involving individual account plan participants which has divided the circuits:

1.  Whether participants in individual account plans may obtain relief to the plan under section 502(a)(2) of ERISA when the alleged violations affected some, but not all, of the plan participants’ accounts. 

2. Whether a fiduciary has a duty under ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D), to disregard the terms of the plan document where those terms require him to violate his fiduciary duties under ERISA § 404(a)(1)(A) and (B), 29 U.S.C. § 1104(a)(1)(A) and (B).

Plaintiff-Petitioner Coates brought thisaction individually and on behalf of a class of similarly situated participants of the Company’s Deferred Profit-Sharing Plan against Agilent Technologies.  The Plan historically required participants, as they approached retirement age, to gradually shift their Plan investments from the riskier “Fund A,” one heavily weighted in equities, to the less volatile “Fund B,” one predominantly composed of fixed income investments.  In 2000, however, the Plan’s sponsors amended the Plan to require the elimination of the Fund B and the immediate reallocation of its assets to Fund A.  As a result, those participants with assets primarily invested in Fund B, who were predominantly over age 55, allegedly lost considerable sums of money in the decline of the equities market.

Coates alleged that the Plan’s fiduciaries should have declined to follow the plan sponsor’s amendment of the plan instrument because it required them to breach their fiduciary duties to him and his class of similarly situated older participants who had invested their retirement assets in the fixed income investment option.

The Ninth Circuit affirmed the district court's granting of Agilent's motion to dismiss, finding that the fiduciaries could not be held liable under ERISA Section 502(a)(2), because the Defendants’ decision to implement the terms of the plan amendment was not subject to the fiduciary standards contained in ERISA Section 404.  The Court further held that Petitioner failed to state a claim under ERISA section 502(a)(2), reasoning that “Defendants’ duties ran to the plan as a whole, not to any subset of beneficiaries, because fiduciaries are required to take impartial account of the interests of all beneficiaries.”

It will be interesting to see if the Court decides to weigh in on these challenging ERISA issues that are currently dividing the circuit courts.

PS