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Fourth Circuit Rejects “Could Have” Standard for Determining Fiduciary Breach

The U.S. Court of Appeals for the Fourth Circuit held that the plan administrator failed to follow a prudent process when it decided to forcibly divest all stock of a predecessor employer while such stock was priced at an all-time low.  As a result, the burden shifted to the administrator to prove that despite its imprudent decision-making process, its ultimate investment decision was “objectively prudent.”  The lower court ruled the decision was objectively prudent because a hypothetical prudent fiduciary “could have” made the same decision after performing a proper investigation.  Rejecting this standard for determining loss causation, the Fourth Circuit held that the proper standard is whether a reasonable fiduciary “would have” made the same decision.  Tatum v. RJR Pension Investment Committee, No. 13-1360 (4th Cir. Aug. 4, 2014).

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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