Workers who purchased company stock as part of their 401(K) or ESOP ERISA retirement plan and their company filed for bankruptcy.
Employees may be able to participate in a lawsuit to recover financial compensation for damages resulting from the company's breach of fiduciary duty.
Companies who offer their own company stock as an investment option in their 401(k) or ESOP ERISA retirement plans.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes minimum standards for pension plans in private industries. ERISA requires plans to provide participants with information regarding the plan; establish minimum standards for vesting, participation, benefit accrual and funding; require accountability of plan fiduciaries; and allow participants the opportunity to sue for benefits and breaches of fiduciary duty.
ERISA Litigation: Bankrupt Companies and Retirement Plans
Companies who offer their own company stock as an investment option in their 401(k) or ESOP ERISA retirement plans have certain obligations. When these companies file for bankruptcy protection, they are required to take certain actions to protect the plans from losses resulting from the bankruptcy.
In general, a fiduciary may be held accountable for a breach of fiduciary duty if they:
Failed to manage plan assets by continuing to offer company stock as an investment option
Invested and held employee and matching contributions in the stock when they realized or should have realized that company stock was not a suitable investment option due to the company’s financial struggles
Failed to disclose thorough and accurate information regarding the company’s financial results
If you invested in company stock in your 401(k) or ESOP plan and your employer filed for bankruptcy, you may be able to take legal action if the fiduciary breached its legal duties under ERISA.