Another View on Whether a Cashed Out 401(k) Participant Has Standing to Sue for Losses Under ERISA
The cases relied upon by the judge are an instructive lot, and almost a road map for briefing this issue when arguing in favor of standing for such a cashed out participant:
More persuasive is the reasoning of the Seventh Circuit, which recently reached an opposite outcome and found that a plan participant did have standing, despite having cashed out of the plan. [The Seventh Circuit found that] "[b]enefits are benefits; in a defined-contribution plan they are the value of the retirement account when the employee retires, and a breach of fiduciary duty that diminishes that value gives rise to a claim for benefits measured by the difference between what the retirement account was worth when the employee retired and cashed it out and what it would have been worth then had it not been for the breach of fiduciary duty." The Third and Sixth Circuits have adopted this line of reasoning as well. Also instructive is the analysis by Judge Hall in the District of Connecticut: “[T]he court is puzzled by the . . . assertion that a claim for benefits lost due to imprudent fiduciary investment becomes a claim for damages once the plaintiff accepts a lump sum payment constituting the balance of her account with the relevant plan. . . . Regardless of whether [the participant] accepted or refused the balance of her account, her underlying claim would still be for the money lost by the Plan as a result of the defendants' imprudent investments. The court sees no logical reason why such a claim seeks an ascertainable benefit when the plaintiff refuses a lump sum, but the very same claim seeks an unascertainable damage award once the plaintiff accepts a lump sum.”