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4th Circuit Holds that the Limitations Period for ERISA Claims of Imprudent Plan Investments Commences with Initial Fund Selection and Does Not Continue With Ongoing Monitoring of Funds, Absent Material Change in Circumstances

A group of participants in Bank of America?ÇÖs 401(k) plan sued alleging the bank engaged in prohibited transactions and breached its fiduciary duty by selecting bank-affiliated mutual funds despite the funds?ÇÖ poor performance and higher fees in comparison to other available investment alternatives. The participants conceded that the initial fund selection was outside of ERISA?ÇÖs general six-year limitations period. Nevertheless, the participants argued that the bank?ÇÖs failure to remove the bank-affiliated mutual funds at meetings of its benefits committee, which occurred within the limitations period, constituted new prohibited transactions and new breaches of its fiduciary duty to monitor plan investments. The 4th Circuit disagreed, reasoning that a decision to continue certain investments, or even the bank?ÇÖs failure to act, cannot constitute a ?Ç£transaction?Ç¥ for ERISA purposes; therefore, the only transaction upon which the participants could assert a prohibited transaction claim was the bank?ÇÖs initial selection of the bank-affiliated mutual funds.… Continue Reading

February 2013
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