Washington – The ERISA Industry Committee (ERIC) and the U.S. Chamber of Commerce filed an amicus brief with the U.S. Court of Appeals for the Fourth Circuit in Stana v. SAS Institute Inc, urging the court to uphold a district court ruling that dismissed claims related to the company’s 401(k) plan.
The case turns on two separate challenges to how SAS Institute manages its retirement plan. First, plaintiffs claim the defendants violated ERISA by using forfeited 401(k) funds, money left behind when employees leave before their contributions fully vest, to pay matching contributions owed to other participants. Federal regulations have explicitly allowed this practice for decades, and SAS Institute’s plan, like virtually all such plans, gave SAS Institute that choice. The district court agreed, ruling that SAS Institute followed the law and that plaintiffs never received less than what the plan promised.
Second, plaintiffs claimed SAS Institute chose bad investment options for the plan, based on comparisons of those investments to others plaintiffs picked with 20-20 hindsight. And the investments they selected for comparison to the plan’s were fundamentally and significantly different types of investments. ERIC’s brief argues that the district court properly rejected those claims as not meeting the standard established by the Supreme Court and numerous other lower courts.
“Retirement plans are required to follow both ERISA and their own rules, and SAS Institute did exactly that,” said Doug Hinson, Executive Director of the ERIC Legal Center. “Plaintiffs want courts to punish employers for choosing investments that didn’t perform as well as others that plaintiffs pick with the benefit of hindsight, but such comparisons are unfair, and courts routinely reject them. Even worse, the investments plaintiffs cherry-pick aren’t actually comparable in many ways. If plan fiduciaries could be sued based on such comparisons, nobody would be willing to do the job.”
ERIC’s brief argues that forcing employers to provide more benefits than their plans promise, and to apply different rules than what has been allowed for decades, would discourage companies from offering matching contributions in the first place. It also warns that judging the selection of investment options using both impermissible hindsight and comparisons to different types of investments would open the door to even more costly litigation over nearly every investment choice a plan fiduciary makes. It would mean more money spent on defending meritless lawsuits, and less money available to employers to provide the benefits at issue.
Read full brief here.