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Researh Service
Foxes, Henhouses, and Pension Plans:
Supreme Court Concludes Pensioners
Receiving Promised Benefits Can't Sue for
Retirement Plan Mismanagement
June 30, 2020
In early June 2020, the Supreme Court handed down its decision in Thole v. U& Beank concerning the
ability of pension plan participants to sue plan fiduciaries who engage in alleged misconduct. In Thole,
the Court's majority held, in a 5-4 dec is ion, that pensioners receiving the full amount of their retirement
benefits lacked standing to sue plan fiduciaries for self-dealing and mismanagement of pension plan
investments. This Legal Sidebar provides background on federal pension plan regulation under the
Employee Retirement Income Security Act (ERISA) and standing to sue in federal courts; discusses the
Court's decision in Thole; and concludes with selected legal considerations for Congress.
Background
ERISA's Regulation of Pension Benefits
ERISAprovides a comprehensive federal scheme for regulating private-sector employee benefit plans,
and currently governs approximately 710,000 retirement plans. TheAct does not require employers to
offer pension benefits, but those that do must comply with the Act's requirements. In general, ERISA
regulates two types of pension plans: defined benefit plans and defined contribution plans. The Thole case
involves a defined benefit plan, which consist[s] of a pool of assets, rather than individual dedicated
accounts. In a defined benefit plan, an employee is promised a specified future benefit (traditionally, an
annuity beginning at retirement) based on factors such as the employee's salary, age, and years of service.
ERISA generally requires the employer to fund a defined benefit plan adequately, invest plan assets and
bear the risk for such investments, and compensate for any shortfalls. Should a defined benefit plan be
terminated with insuffic ient funds to pay retirement benefits, the Pension Benefit Guaranty Corporation
(PBGC) pays certain guaranteed benefits to plan participants, subject to statutory limits.
Congressional Re search Service
https://crsreports.congress.gov
LSB10506
CRS Lega i&sebar
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