Justices to rule on investor's suit against 401(k)

WASHINGTON -- James LaRue says he lost $150,000 when his instructions to his employer on where to invest money in his retirement plan were ignored.

Now the Supreme Court will decide whether a federal pension-protection law gives LaRue the right to sue to recover his losses. Arguments in the case were scheduled for Monday.

LaRue, who used to work at a management consulting firm, is among the 42 million workers who contributed to a 401(k) retirement plan, one of 250,000 across the country. At issue in LaRue's case are the limits to lawsuits under the Employee Retirement Income Security Act. It regulates private-sector retirement plans holding over $5.5 trillion in assets, including $2 trillion in 401(k) plans.

Unlike traditional pension plans, participants in 401(k) plans do not know how much money they will receive in retirement. It depends on how well their chosen investments have performed.

ERISA was designed to safeguard pension fund money from misappropriation.

It is less clear what action an individual account holder can take against a retirement plan when the conduct at issue is less than criminal.

LaRue says that in 2000 and 2001 he requested changes in his investment allocations in mutual funds that were available to participants in his company's 401(k) plan. He says the requests were not honored.

"I wanted to sell stocks and move to cash because I thought the market would head down. I was right," LaRue said in a telephone interview.

LaRue sued in 2004, saying he had tried to avoid going to court and instead sought to reach a settlement with his former employers. He was unsuccessful, as it turned out.

Business groups assign a different motive to the delay in filing the second suit, saying LaRue was waiting to see how the market performed. If the value of his investment went up, he made money. If it went down, he would recover his losses in court.