The U.S. Supreme Court has recently added new possibilities to the complicated world of employee benefit claims by permitting an employee to sue a 401(k) plan administrator for a breach of fiduciary duty that only harmed the employee's individual interest, not the plan as a whole.

The Case: In James LaRue v. DeWolff, Boberg & Associates, Inc.et al., Mr. LaRue sued the administrator of a 401(k) retirement plan and claimed that because the administrator had failed to act in a timely fashion on his investment instructions, his individual account was "depleted" by $150,000. Mr. LaRue's claim was fashioned as a breach of the administrator's fiduciary duty to act prudently in his interest.

However, ERISA bars fiduciary duty claims of this kind unless it is intended to benefit the plan as a whole, not an individual's specific interest. In other words, had the administrator's alleged misconduct caused a loss to all of the participants, Mr. LaRue's fiduciary breach claim could be pursued and any losses restored to the plan as a whole. Since LaRue really only wanted to restore money that belonged to him, his suit was dismissed under familiar rules governing ERISA claims.

The Ruling: The Supreme Court's decision changed the rules - sort of. Because the 401(k) plan in question was a "defined contribution plan," that is, participants only get back what they put in, plus investment gains or losses and less expenses, the Court concluded that prior rulings regarding ERISA claims for breach of fiduciary duty did not apply. Since a defined contribution plan consists of the sum of its parts, a participant could legitimately seek a remedy for a breach that harmed only the participant's individual interest in the plan.

This may sound like a "yes you can," but the court's ruling was actually a "maybe." Although it opened a door to a new ERISA remedy, certain opinions of the justices raised questions as to whether this was really nothing more than a standard claim for benefits and should be treated as such.

• In a standard claim, participants would be required to first exhaust administrative remedies and, even then, the court would probably have to defer to the administrator's decision if the plan granted discretionary authority to the fiduciary.
• Because his case was dismissed based on the old ERISA rule barring individual relief for breaches of fiduciary duty, Mr. LaRue will have to go back to the trial court and not only face potential motions by the defendant that his claim should be dismissed for failure to follow plan rules, but also prove as a matter of fact that the administrator acted improperly and that his interest in the plan was harmed as a result.

What does this mean to employers? While this decision has created quite a stir in the ERISA world, it may have limited impact on well-drafted 401(k) plans. Although a participant can now claim that a fiduciary's breach has harmed an individual plan interest, whether this new claim will balance the decided advantage of fiduciaries who have discretion to act on behalf of the plan remains to be seen. At minimum, this case is a reminder that:

• Employers sponsoring 401(k) plans should include language in the plan document that requires claims of breach of fiduciary duty to be submitted for administrative review by a different plan fiduciary before a participant can file suit.

• The plan administrator or other fiduciary deciding this claim should also be given discretionary authority to determine whether a breach has occurred. In this way, a court may be required to uphold the fiduciary's decision as long as it was reasonable.