In an appeal, the Eleventh Circuit was asked to answer (1) whether ERISA requires fiduciaries of an eligible individual account plan that offers employer stock as an investment option to divulge material, nonpublic financial information concerning the employer, and (2) whether the exemption from the diversification requirement under ERISA § 404(a)(2) that applies to the acquisition (or holding) of employer stock in an individual account plan similarly exempts a fiduciary from the duty of prudence in ERISA § 404(a)(1)(B) when employer stock is offered as an investment option.
Relying on its 2012 decision in Lanfear v. Home Depot, Inc., (11th Cir. 2012), the court answered both questions in the negative. With respect to the first question, the court held that ERISA does not require the disclosure of nonpublic, material information that may affect the value of employer stock. As to the second question, the court held ERISA § 404(a)(2) does not absolve a fiduciary from his or her duty to act prudently in deciding to offer employer stock as an investment option.
Of course, a fiduciary’s decision to offer employer securities as an investment option within an eligible individual account plan may be entitled to a presumption of prudence (i.e., the so-called Moench presumption), if the plan document requires or strongly encourages employer stock to be offered as an investment option. (Fisch v. Suntrust Banks, Inc.,11th Cir., 2013).