Lawsuit: DC Plans More Vulnerable to ERISA Litigation Than DB Plans
Lawyers taking aim at a company’s retirement savings plan say firms with 401(k)s should expect to be sued more than those with traditional pensions.
Defined contribution (DC) retirement plans are far more susceptible to Employee Retirement Income Security Act (ERISA) lawsuits than defined benefit (DB) plans, lawyers argue in a lawsuit filed against The Wesco Distribution Inc. Retirement Savings Plan.
“The potential for imprudence is much greater in defined contribution plans than in defined benefit plans,” said the lawsuit.
The complaint, which alleges Wesco neglected its fiduciary duties by allowing excessive fees, said that companies with DC plans are much more likely to be sued than companies with DB plans because of the way they’re structured. Lawyers for participants of the Wesco retirement plan, who were from the law firms of Chimicles Schwartz Kriner & Donaldson-Smith and Franklin D. Azar & Associa
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Asset returns of 13.4% offset plunging discount rates to lift funded levels to 88.4%.
Robust returns of 13.4% for the 100 largest corporate pension plans in the US offset a 67-basis-point drop in the discount rate to raise the plans’ funded ratio to 88.4% last year from 87.5% at the end of 2019, according to consulting firm Milliman’s “2021 Corporate Pension Funding Study.”
The funded levels rebounded strongly during the second half of the year after the bottoming out at 81% in July.
“Corporate pensions demonstrated their resilience in 2020 amidst a turbulent year of market volatility, declining discount rates, and employer stressors,” Zorast Wadia, co-author of Milliman’s Pension Funding Study, said in a statement. “With a possible end in sight to the pandemic, and funding relief such as the CARES [Coronavirus Aid, Relief, and Economic Security] Act and now the American Rescue Plan Act of 2021 [ARPA], the outlook for these plans is much better than it was 12 mo