Trustees' dilemma

In the recent wave of employer stock litigation, directed trustees of corporate pension plans have been marked by the plaintiffs' bar as targets with invitingly deep pockets. This litigation trend has resulted in the filing of more than 100 company-stock-related breach of fiduciary duty lawsuits in the past four years. The litigation has raised many important issues for fiduciaries of participant-directed 401(k) and similar plans. For financial institutions that provide directed-trustee services, the litigation has raised questions that go to the core of these institutions' responsibilities as trustee. As a general rule, ERISA requires that pension plan assets be held in trust by one or more trustees. In the case of corporate pension plans, the trustee that is used for this purpose is typically a bank or trust company. However, ERISA does not define what a "proper" direction is, nor does the statute provide further guidance on the scope of a directed trustee's obligation to determine whether a particular direction is contrary to ERISA.