The Employee Retirement Income Security Act (ERISA) imposes a fiduciary duty on managers of employee pension plans to act in the best interests of workers who have been promised benefits. A fiduciary duty is the highest level of duty owed under the law. Plan managers must always make prudent decisions while focusing on how to advance the interests of workers.
While ERISA’s fiduciary duty rule is intended to prevent bad behavior on the part of plan managers and encourage sensible management of pension plans, ERISA also goes further to specifically outline some types of bad behavior plan managers should avoid. Prohibited transaction rules are imbedded within the Act’s statutory framework and these transactions are never permitted. If a prohibited action is taken, an ERISA lawyer should be contacted right away so employees can take action to recover compensation for any resulting losses.
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What are ERISA Prohibited Transactions?
ERISA section 406(a) prohibits fiduciaries from entering into transactions with plan sponsors, service providers or affiliates. Prohibited transactions between pension plans and parties of interest include:
- Sponsors of plans, service providers and all affiliates
- Sales, exchanges and leases of property
- Lending money
- Extending credit
- Providing goods or services
- Transferring plan assets
- Acquiring real property for the plan
ERISA section 406(b) establishes a strict prohibition against all transactions that would involve self-dealing by a fiduciary of a pension plan. Fiduciaries may not use any of the assets of pension plans to advance their own interests and fiduciaries are strictly prohibited from acting on both sides of any transaction involving the plan or from receiving any kickbacks in connection with the performance of their plan duties.
While there are some limited exemptions from prohibited transactions established by section 408(a) of ERISA, employees should generally be aware of the types of transactions that fiduciaries are not permitted to take. If an employee suspects prohibited transactions have been undertaken, ERISA law attorneys can explore legal remedies for the best course of action.
Taking Legal Action for Breach of Fiduciary Duty
A breach of fiduciary duty and/or the engagement in prohibited transactions can cause significant losses to pension plan beneficiaries as they see the value of their pension reduced because a fiduciary has enriched him or herself at the plan’s expense. Employees can pursue legal action to recover compensation for losses caused by the breach.
ERISA claims are often class actions, as all employees involved in the plan sustain substantially similar losses and come together to make one single claim against those responsible for damages. ERISA class actions make it possible for plaintiffs to recover their losses without active day-to-day involvement in litigation since they can just become a part of the class and trust the lead counsel and named plaintiffs to move the case forward effectively.
Choosing the right attorney for an ERISA class action claim is important, especially in clear-cut cases where prohibited transactions occurred and compensation should be available. Zamansky LLC has provided legal representation in many ERISA claims and our ERISA law attorneys can provide extensive legal experience to work on your case to help you fight for the money and benefits you deserve. Call us as soon as possible for help when you suspect ERISA plan fiduciaries have engaged in prohibited behaviors.