When Can 401(k) Investors Recover Losses From a Drop in the Price of Their Employer’s Stock?


If you are saving for retirement by investing in a 401(k), what happens when the value of your retirement plan drops unexpectedly? What if the losses in your portfolio are so substantial that you are likely to suffer the effects for the rest of your life? What if the losses in your 401(k) are the result of a drop in the price of your employer’s own stock?

These are questions that keep many employees up at night. As an employee with a 401(k), you expect your company to do the right thing to help your retirement savings grow. But, what if it doesn’t? Worse, what if your company hides information knowing that doing so will cause you to suffer substantial losses in your retirement portfolio? Contact a knowledgeable investment fraud attorney at our firm today to discuss your legal options.

Zamansky LLC Takes IBM Employees’ 401(k) Fight to the U.S. Supreme Court

Recently, Zamansky LLC partner Sam Bonderoff argued these questions before the U.S. Supreme Court. Mr. Bonderoff represents IBM employees who invested in the company’s stock through its 401(k) plan, and who lost a significant portion of their retirement savings when IBM’s stock price dropped by seven percent without warning. But, while most IBM employees were unaware of the risk of the company’s stock price tumbling, this was not the case among the company’s top executives. As alleged in the employees’ class action lawsuit, IBM continued to invest its employees’ 401(k) funds in company stock even though it was known behind closed doors that the company’s stock value was artificially inflated.

Historically, federal courts have denied so-called “stock-drop” 401(k) fraud claims. Over the past five years, courts across the country have denied similar types of claims filed on behalf of RadioShack, Target, Lehman Brothers, Citigroup, Whole Foods, JPMorgan and BP employees. However, a federal appeals court sided with IBM’s employees in their recent stock-drop case, and now the Supreme Court is considering the employees’ claim at the request of IBM’s attorneys.

If the Supreme Court sides with IBM’s employees, the victory is expected to have wide-reaching implications for 401(k) investors at companies across the country. As one ERISA attorney told Pensions & Investments, “If the court makes the standard more plaintiff friendly then there will be no shortage of these cases being filed. . . . It could really open the floodgates to more stock-drop cases.”

What are Your Legal Rights as a 401(k) Investor?

The fact that the IBM employees’ class action lawsuit made it all the way to the U.S. Supreme Court signifies that there is not a clear-cut answer when it comes to determining employees’ rights in stock-drop cases. Furthermore, even in cases where the Employee Retirement Income Security Act (ERISA) provides clear protections for employee-investors, companies will still often vigorously dispute allegations of 401(k) fraud. As a result, employees need to be vigilant about protecting their retirement savings, and we encourage anyone with questions to contact us for a free and confidential consultation.

Speak With a 401(k) Investment Fraud Attorney at Zamansky LLC

Have you suffered 401(k) losses as a result of a drop in your company’s stock price? Have you suffered unexpected 401(k) losses under other circumstances? To speak with an investment fraud attorney about your case in confidence, call 212-742-1414 or request a free consultation online today.