An employer has a fiduciary duty to manage properly its employees' 401(k) accounts. International Paper employees claimed that the company violated its fiduciary duty in three main ways: (1) unusually high mutual-fund management fees that were paid to JP Morgan Chase; (2) improper use of International Paper company stock as an investment vehicle; and, (3) failing to promptly send in the payments so the company could make interest off the "float." The settlement was for $30 million
The suit by the International Paper employees was brought under a federal law known as the Employee Retirement Income Security Act, popularly known as "ERISA." ERISA imposes upon the manager of a retirement plan such as a 401(k) account a fiduciary duty to manage the account. This fiduciary duty as basically three parts: (1) a duty of loyalty pursuant to which all decisions regarding an ERISA plan must be plan with an eye single to the interest to the participants and beneficiaries; (2) ERISA imposes a prudent man obligation, which is an unwavering duty to act both as a prudent person would act in a similar situation and with single minded devotion to those same plan participants and beneficiaries; and, (3) an ERISA fiduciary must act for the exclusive purpose of providing benefits to plan beneficiaries. The duties charged to an ERISA fiduciary are the highest known to the law. When enforcing these important responsibilities, we focus not only on the merits of the transaction, but also on the thoroughness of the investigation into the merits of the transaction.