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Supreme Court Likely to Rule on Stock Drop Case

Seeking to resolve an issue that one legal expert claims has been festering for 20 years, the Solicitor General has asked the U.S. Supreme Court to take up a stock drop case in hopes of resolving a judicial split. In its September 2012 Fifth Third Bancorp ruling, the 6th U.S. Circuit Court of Appeals revived a class action suit addressing the question of whether a plan fiduciary should enjoy a “presumption of prudence” in stock drop cases.

The plaintiffs in the case sued when company stock in their retirement plan dropped 74% after the subprime mortgage crisis. Though plan sponsors generally prevail in these cases, without the special “presumption of prudence,” more participant cases are likely to be successful — which raises the question posed by FRA Tools legal analyst (and former ERISA litigator) Tom Clark of whether company stock in DC plans is worth the risk. If the DOL and the Solicitor General get their way, it’s likely that the Supreme Court will answer that question.

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