The extent to which a participant in a tax-qualified defined benefit plan has standing to sue the plan’s fiduciaries for mismanagement of plan assets has long been unclear. The argument against standing is that the participant has not suffered any injury because the participant would receive the same benefit from the plan regardless of the outcome of the lawsuit.

The Supreme Court recently adopted this argument in Thole v. U.S. Bank N.A., 590 U. S. ____ (2020). In that case, two retired participants in a defined benefit plan sponsored by U.S. Bank sued the plan’s fiduciaries for mismanagement of plan assets allegedly resulting in $750 million of losses. Both participants were in pay status and receiving a fixed monthly payment. In holding that the participants lacked standing to sue, the 5-4 majority opinion written by Justice Kavanaugh states:

Thole and Smith have received all of their monthly benefit payments so far, and the outcome of this suit would not affect their future benefit payments. If Thole and Smith were to lose this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny less. If Thole and Smith were to win this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny more. The plaintiffs therefore have no concrete stake in this lawsuit.

The court left open the possibility that a participant might have standing to sue if the plan were mismanaged so badly that it “substantially increased the risk that the plan and employer would fail and be unable to pay the participants’ future pension benefits.” In a footnote, the court suggests (without deciding) that even in such a case, a participant whose benefit is fully guaranteed by the PBGC might not have standing to sue.

This decision will likely substantially curtail litigation against defined benefit plans. However, investment fiduciaries should continue to have a good fiduciary process for selecting plan investments. While participants may find it difficult to sue, the Department of Labor still has the authority to enforce ERISA’s fiduciary obligations.