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Compliance March 29, 2011
Claim Against Consultant Allowed to Proceed
The trustees of a Nevada supply company’s 401(k) plan can proceed
with their suit accusing a plan consultant of a fiduciary
breach by convincing the plan to invest in questionable funds.
Reported by Fred Schneyer
U.S. District Judge Edward C. Reed of the U.S. District Court for the District of Nevada said the plan trustees “narrowly survived” the plan consultant’s motion to dismiss because there were very few indications that the consultant was indeed serving as a fiduciary under the Employee Retirement Income Security Act (ERISA).
However, Reed did throw out the trustees’ claim that the consultant, Barry Downs, violated ERISA by failing to provide the trustees with plan documents. The court said that only plan administrators are liable under ERISA for failing to disclose plan documents. Western Nevada Supply Co.’s profit-sharing and 401(k) plans brought a lawsuit in 2009 against investment managers for their advice to put money in particular investment options.
The court found there were sufficient allegations that Downs was a plan fiduciary through his capacity as a paid consultant to the plans. The case is Western Nevada Supply Co. Profit-Sharing Plan and Trust v. Aneesard Mgmt., D. Nev., No. 3:09-cv-00737-ECR-VPC.