This is something that many will ask given the hit that the market has taken as the result of COVID-19. But it goes beyond that. It is of critical importance to employees who are approaching retirement age and affects people of all ages.
While many don't pay attention to their retirement account until that day approaches, reviewing it sooner, particularly your investments in it, is important.
Employees at Johnson & Johnson invested their retirement accounts in the company's stock. Such plans are good for the company and usually good for the employees – everyone benefitting from their joint efforts. Unless, of course, the executives of the company decide putting asbestos in talcum powder is a good idea. A recent case underscores how important it is to make sure you don't put all your eggs in one basket even if it is the tried and true company you work for. See, Perrone v. Johnson & Johnson, et al., No. CV 19-00923 (FLW), 2020 WL 2060324 (D.N.J. Apr. 29, 2020)
As people began to suffer from and die from asbestos without having been exposed to the usual sources, the search began for its cause. In December 2018, Reuters published an article documenting that Johnson & Johnson had known for many years that there was asbestos in its talcum powder, which it actively concealed. Johnson & Johnson's stock dropped 10%, and thus, their retirement plans suffered.
The affected employees obtained counsel, and suit was filed on behalf of all participants in the retirement plans which had invested in Johnson & Johnson. The suit claimed breach of fiduciary duty, an ERISA claim. The Supreme Court has described a breach of fiduciary duty claim as a catchall ERISA claim when there is no benefit claim.
However, under ERISA not every management level entity is a fiduciary. In fact, in this case Johnson & Johnson was not the plan administrator, the pension benefits committee was. The fact that Johnson & Johnson appointed the members to the committee, all of whom were Johnson & Johnson employees, did not make the company a fiduciary. The plaintiffs argued that an application of the doctrine of respondeat superior should apply thus advancing ERISA's goals of protecting plans and benefits. The Court disagreed.
Another issue was whether the complaint properly alleged an alternative action that the defendants could have undertaken – an ERISA requirement. The plaintiffs argued that the defendants could have made disclosures sooner and thus lessened the damage. The court concluded that this was conclusory. There was no evidence that the timing of the disclosures would have made a difference. The complaint was dismissed but with leave to amend.
There are a lot of lessons here:
1. All employees should pay attention to their retirement plan investments.
While I am not a broker or financial adviser, putting all of your retirement eggs in any one basket seems like a bad idea. COVID-19 has shown us that unknowns can bring even the most secure company to its knees.
2. If there's trouble, you need to know the actual plan administrator. It's not always who you think.
All requests for information should be made to the plan administrator, including a request for plan documents. A general request to the HR department or to the company may not trigger any obligation to provide accurate, complete or even correct information. The plan administrator however has a fiduciary duty to tell the truth and to provide accurate information.
If a retirement account has taken a sharp drop, and there is evidence that it is due to malfeasance or wrongful conduct by the plan administrator (something amounting to breach of fiduciary duty), seek the help of an experienced pension lawyer or retirement attorney.