Nortel Settles ERISA Benefits Lawsuit

Washington, DCNortel Networks Corp. is the latest company to settle an ERISA plan lawsuit, which alleged that the company violated ERISA benefits laws. Employees who believe their company has violated an ERISA pension law can file an ERISA investment lawsuit to recover losses.

According to Dow Jones Daily Bankruptcy Review (09/02/11), Nortel agreed to a $21.5 million settlement in a lawsuit that alleged the company violated the Employee Retirement Income Security Act (ERISA) when it offered company stock as an option for the employee benefit plan without allegedly disclosing the risks associated with company stock as an investment.

Nortel did not admit any wrongdoing in the situation but said it agreed to the settlement to avoid protracted and costly litigation.

Fiduciaries of an ERISA benefits plan are obligated to make decisions that are in the best interests of plan participants, not in the best interests of the company. Although the Labor Board is currently working to amend the definition of fiduciary—possibly to include more people who are considered fiduciaries and therefore held liable for their investment advice—activities that constitute a breach of fiduciary duty likely will not change.

That means that fiduciaries must continue to make recommendations and provide options that are in the best interests of plan participants, including employees who invest in employee stock option plans.