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Presumption of Reasonableness Standard Does Not Apply at Pleading Stage and SEC Filings Incorporated by Reference in a Summary Plan Description are Fiduciary Communications

Plan participants sued claiming breach of fiduciary duty relating to an employee stock ownership plan (?Ç£ESOP?Ç¥) offered as one investment option in the employer?ÇÖs defined contribution, participant directed retirement plan.?á The trial court dismissed the suit for failure to state a plausible claim for relief.?á The 6th Circuit reversed the dismissal, holding that (1) the presumption of reasonableness standard applied to an ESOP fiduciary?ÇÖs decision to remain invested in employer securities does not apply at the pleading stage and (2) SEC filings, when incorporated by reference into a Summary Plan Description (?Ç£SPD?Ç¥), are a fiduciary communication under ERISA.?á First, the court clarified that the presumption of reasonableness standard is not appropriately applied at the pleading stage because the presumption can be overcome ?Ç£when applied to a fully developed evidentiary record.?Ç¥?á The court reasoned that while ERISA 404(a)(2) generally abrogates an ESOP fiduciary?ÇÖs duty to diversify investments, the fiduciary is not… Continue Reading

November 2012
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