January 28, 2016
The Supreme Court has looked at Amgen v. Harris, a “stock drop” case, for a second time. This time the Court held that, for a participant to challenge a fiduciary’s action with regard to employer stock investment offered in a §401(k) plan with participant directed investment, the participant must “plausibly allege” (i.e., argue) that a prudent fiduciary in the same position could not have concluded that there was no alternative action (to retaining the employer stock investment) that “would not have done more harm than good.” Here the participants argued that Amgen fiduciaries violated the fiduciary rules by not eliminating the Amgen stock option from its plans when the fiduciaries should have known that the stock’s value was overinflated (because of unrevealed information about the failure of a drug that Amgen was developing). The participants did not, however, address alternative actions, as required by the Court in an earlier case, Fifth Third Bancorp v. Dudenhoeffer.
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