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Terminating DC 401k Plan


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Does any know how many years after the 401k Plan terminates can a participant bring a claim against the Fiduciary and Plan Sponsor. One of my client has insurance policy for this type of claim, and they will need to purchase “tail coverage” for the policy for it to stay in effect in case anyone brings a claim. Is the statute of limitations for a 401k plan usually 3 years, or is it longer?

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I will leave up to the lawyers to fill in the details because there seems to be a lot of wiggle room to extend the time frames.  Generally,

"29 U.S. Code § 1113 - Limitation of actions

No action may be commenced under this subchapter with respect to a fiduciary’s breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of—
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation."

(The "actual knowledge" phrase baffles me.)

Part of the decision for how much insurance to have and for how long is assessing the risk.  Since this is a plan termination, making sure that everyone who has an accrued benefit is paid in full and keeping getting documentation proof that the checks were cashed goes a long way towards having some peace of mind.

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ERISA § 413, which Paul I points to, governs a fiduciary-breach claim under ERISA’s title I.

ERISA does not specify a limitations period for a benefit claim. Federal and States’ courts’ interpretations and applications vary, and sometimes “borrow” a period from a relevant State’s law.

Claims under banking, insurance, securities, and other law might involve yet different periods.

Instead of assuming the risk of error about which rule or rules might apply and how a court might interpret and apply them, a fiduciary might consider, with its lawyer’s evaluation and other help, negotiating an insurance contract under which one premium covers the tail risks with the insurer underwriting the risk on how long the fiduciary’s exposure continues.

Just my musing; not advice to anyone.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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