The 11th U.S. Circuit Court of Appeals said the case against SunTrust Banks (see “DOL Files Brief in SunTrust Stock Drop Case”) raises two questions:
- Does ERISA impose upon fiduciaries of an eligible individual account plan (EIAP) that offers the plan sponsor’s publicly traded stock as an investment option a duty to disclose material, nonpublic financial information about the plan sponsor beyond the specific disclosures mandated by ERISA and its implementing regulations?
- Does Section 404(a)(2) of ERISA, which exempts EIAPs that acquire and hold employer securities from ERISA’s diversification requirement, exempt fiduciaries of EIAPs from exercising their overarching duty of prudence under Section 404(a)(1) even when it is imprudent to acquire or hold employer securities in an EIAP?
The appellate court said its recent decision in Lanfear v. Home Depot, Inc. (see “DOL Disputes Home Depot’s Win in Stock Drop Suit”), resolves the issues in this case. In Home Depot, the court found ERISA does not impose a duty to provide plan participants with nonpublic information affecting the value of the company’s stock. In addition, it found such a prudence claim was not a veiled diversification claim, and thus does not fall within the Section 404(a)(2) exemption.
The 11th Circuit remanded the case back to the district court for further proceedings.The court’s opinion is here.