A participant in the Target Corporation 401(k) Plan has filed a lawsuit claiming that Target acted in violation of ERISA by allowing participants to invest in company stock when it was not prudent. Specifically, the complaint claims that the company failed to disclose problems with its Canadian operations causing artificially inflated prices during the period of February 27, 2013 through May 19, 2014. Upon disclosure of such information, the stock price dropped.
New pleading standards require that plaintiffs offer alternative approaches that fiduciaries could have adopted so as to avoid ERISA infractions, or actions that could perceived to provide more help than harm to the Plan, preventing participant losses in the stock. Actions outlined in the suit include:
- Defendants could have directed all company and participant contributions slated for the company stock fund to be held in cash or short-term equivalent.
- Defendants could have closed or frozen the company stock fund for future investment and directed contributions slated for company stock to be invested according to participants’ instructions, or in absence of instructions, to the Plan’s default investment option.
www.planadviser.com; July 15, 2016.