Trustee Liability

[Guest wwest]

A third party plan trustee gives erroneous information to a plan participant about the timing of a transaction. The error resulted in a loss of thousands of dollars because the stock market took a nose dive. The trust agreement only addresses the trustee to act with care, skill, prudence and diligence of a prudent person in a like capacity. The SPD states the correct timing of the transaction -- contrary to the information the trustee gave. What authority to address this issue? Who is liable to the Participant, if anybody.

[Guest Chuck Miller]

The Plan better plan on making the participant whole.

The federal courts have said that oral communcation even if it conflicts with legal documents governs if the participant acted on the information given by the trustee. This is very similar to the US West case of a few years ago where a company executive gave wrong information in a video conference that participants used to make decisions.

If the participant can document that he/she acted according to the information provided by the trustee, then the Plan should pay participant for the losses.

[Guest RK Matta]

Look at Schmidt v. Sheet Metal Workers, 128 F.3d 541 (7th Cir. 1997) cert denied; Easa v. Florists' Transworld Delivery Ass'n, 5 F.Supp.2d 522 (E.D. Mich. 1998), holding that if the error was made by an employee with no discretion, no liability. These and a few other cases suggest that "clerical" errors, even by a fiduciary, may not result in liability.