ERISA-Eighth Circuit Rules That A Participant In A Defined Benefit Plan Cannot Sue The Fiduciaries For Investment Losses And Excess Fees When The Plan Is Overfunded

In Mcullough v. Aegon USA, Inc., No. 08-1952 (8th Cir. 2009), the plaintiff, Randal McCullough, was a participant in a defined benefit pension plan (the “Plan”) of the defendant, Aegon USA, Inc. (“Aegon”). He had brought suit against Aegon under Section 1132(a)(2) of ERISA, alleging that various fiduciaries of the Plan had breached their fiduciary duties to the Plan. The District Court granted summary judgment for Aegon.

One of the plaintiff’s claims was that the fiduciaries had breached their duties to the Plan under ERISA by causing the Plan to invest in funds offered by Aegon’s subsidiaries and affiliates, and to purchase products and services from those affiliates and subsidiaries, resulting in the payment of fees “that were higher than the norm.” The parties agreed that, at all applicable times, the Plan was “substantially overfunded” , the Plan had never failed to pay benefits and Aegon had no intention of terminating the Plan.

Section 1132(a)(2) of ERISA allows a participant in a plan to bring an action for appropriate relief under Section 1109 of ERISA. Section 1109 generally makes a fiduciary of a plan personally liable to the plan for any losses resulting from his or her breach of fiduciary duty. Building on the earlier Eighth Circuit case of Harley v. Minnesota Mining & Manufacturing Co.,284 F.3d 901 (8th Cir. 2002), the Court ruled that the plaintiff could not bring the claims discussed above under Section 1132(a)(2). The Plan was a defined benefit plan, which promises the plaintiff only a benefit fixed by plan formula (and not dependent on the amount of the Plan’s assets). Further, the Plan’s surplus was sufficiently large so that any losses or excess fees resulting from the Plan’s investment and transactions with Aegon’s subsidiaries and affiliates did not cause actual injury to the plaintiff’s interests in the Plan. As a result, the Court upheld the district court’s summary judgment for Aegon.

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