New Jersey Case Increases Likelihood of ERISA Suits

Corporate America is definitely not losing a lot of sleep over the 3rd Circuit's July 2007 decision in Graden v. Conexant Systems Inc. But those in charge of ERISA compliance may be facing some restless nights.

The ruling--which gives individuals who pull their money from an ERISA plan a continuing right to sue plan administrators under the statute--does not increase the overall liability of plan sponsors. However, by broadening the circle of ERISA claimants, it makes record-keeping considerably more complicated for employers.

"When determining participant standing under ERISA, the relevant inquiry is whether the plaintiff alleges that his benefit payment was deficient on the day it was paid under the terms of the plan and the statute," the court concluded. "If so, he states a claim for benefits, which, if colorable, makes him a participant with standing to sue."

Graden, then, increases the potential claimants under ERISA. And that creates challenges for companies that sponsor 401(k) plans.


Julius Melnitzer

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