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3rd Circuit

Mimicking many of their colleagues, Jingdon Zhu and Adrian Fields, two former Schering-Plough Corp. employees, decided to invest their 401(k) savings in company stock in 2001. But they knew nothing about the financial problems that led to a $138 million drop in the value of the New Jersey drug manufacturer's stock only a year later.

When Schering's stock took this dramatic drop, more than 60 percent of the company's employees had invested in the company. Schering stock constituted 61 percent of the 401(k) plan's assets. Many employees lost their entire retirement savings as a result.

Foremost in the court's mind, it appears, were the public policy issues the U.S. Department of Labor (DOL) highlighted in its brief supporting the plaintiffs. DOL attorney Theresa Gee noted that American employees held $2 trillion worth of all private pension plan assets in individual account plans.

"If the District Court and the defendants' broad arguments are correct," Gee wrote, "participants in 401(k) plans and other individual account plans, such as the Enron plans, would be unable to recover losses to the plan caused by fiduciary breaches, even if the majority of the plan's participants lost most of their retirement savings as a direct result of such breaches."

Especially after Schering.


Julius Melnitzer

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