Recently, the Supreme Court handed down a unanimous opinion in the case of Fifth Third Bancorp v. Dudenhoeffer, rejecting a long-standing rule that fiduciaries of individual account plans are entitled to a "presumption of prudence" when employer stock is offered as an investment option.
The court's ruling impacts 401(k) plans that offer employer stock as an investment option as well as employee stock ownership plans that invest primarily in employer stock.
Many employers offering employer stock as an investment option in a 401(k) plan have been subject to class action lawsuits arising from a substantial drop in their stock price, causing participants to claim that the employer breached its duty of prudence and loyalty by allowing continued investment in the stock.
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