ERISA Defined Benefit Plans Are Not Trust worthy

What role does the common law of trusts play in policing investment decisions made in the context of a defined-benefit retirement plan governed by ERISA? That issue, among others, divided the Supreme Court this past term in Thole v. U.S. Bank N.A. The Court’s majority decided the case by holding that plan beneficiaries had no Article III standing to challenge allegedly self-interested investment decisions made by the plan’s sponsor and administrator. Because the Court grounded its decision in constitutional standing, Congress would be powerless to confer standing on plan beneficiaries without also amending the substantive rights accorded those beneficiaries. This Article has two objectives. The first is to examine the consequences that might have followed if the Court had decided that the plan beneficiaries did have standing. Applying the substantive law of trusts, together with the remedies afforded by trust law, would have done little good for the plan beneficiaries and would not serve as a deterrent for questionable behavior by the plan’s trustee. ERISA is a regulatory statute, and potential abuses call for a regulatory solution. This Article’s second objective is to examine the potential impact of the Court’s analysis of Article III standing. Although trust law is a poor fit for regulating investment decisions by defined benefit plans, the Court’s standing decision has the potential to cripple more productive regulatory efforts. To the extent that the Court’s opinion holds that plan beneficiaries lack constitutional standing unless their benefits are in jeopardy, the opinion may limit the ability of Congress to use the private right of action as a tool for enforcing ERISA mandates