Opinion ID: 2999002
Heading Depth: 3
Heading Rank: 1

Heading: 401(k) Funds

Text: As for the 401(k) funds, it does not appear that Mr. Yager breached his fiduciary duty to plan participants in his initial selection of the funds, his monitoring of the funds or in the information provided to plan participants to assist in their investment choices. When initially selecting the funds, Mr. Yager testified that, in choosing the American Funds, he saw them as a “long-term plan.” R.26, Ex.3 at 40. He stated that he had selected funds with a good “long-term record” and an “ability to perform in an up market or a down market.” Id. The Third Circuit has said that “the adequacy of a fiduciary’s independent investigation and ultimate investment selection is evaluated in light of the ‘character and aims’ of the particular type of plan he serves.” In re Unisys Sav. Plan Litigation, 74 F.3d 420, 434 (3d Cir. 1996) (citing Donovan v. Cunningham, 716 F.2d 1455, 1467 (5th Cir. 1983)). In this case, Mr. Yager’s investment strategy was to find long-term, conservative, reliable investments that would do well during market fluctuations. It was part of his investment strategy to pick solid funds and to stay with them long-term. We cannot say such a strategy was unreasonable or imprudent. Mr. Yager also did not breach his duty in failing to monitor or alter the investments once the four funds were selected in 1991. Ms. Jenkins contends that Mr. Yager did not stay adequately aware of losses in the funds. However, Mr. Erskine testified in his deposition that he spoke to Mr. Yager about once a week and frequently discussed the performance of the plan’s funds, as well as other funds. Mr. Erskine also testified that he provided Mr. Yager with written information on fund performance at least six times a year, including fund reports, prospectuses and newspaper articles. Mr. Yager testified that he reviewed 16 No. 04-4258 the reports for the four funds each year. Therefore, it appears that Mr. Yager adequately monitored the funds. Similarly, Mr. Yager did not breach his fiduciary duties by keeping the same four mutual funds for 401(k) fund investment from 1991 until present. Ms. Jenkins contends that Mr. Yager should have considered moving some of the plan assets out of the three funds that were losing money in 2000, 2001 and 2002.6 While three of the four funds did lose money in 2000, 2001 and 2002, that alone is not evidence that Mr. Yager violated his fiduciary duty. We have stated that investment losses are not proof that an investor violated his duty of care. See DeBruyne v. Equitable Life Assurance Soc. of the United States, 920 F.2d 457, 465 (7th Cir. 1990). Mr. Yager, in his deposition, reiterated that his strategy was to pick conservative funds that would perform well during market fluctuation. He stated that he would stay with those funds even in a year where the fund loses money because, in the long-term, those funds would still perform well. Mr. Yager, in keeping the four mutual funds, did not violate his standard of care. Nothing in the record suggests that it was not reasonable and prudent to select conservative funds with long-term growth potential and to stay with those mutual funds even during years of lower performance. Notably, Ms. Jenkins does not suggest any concrete course of 6 Ms. Jenkins herself could have changed the direction of her investment and directed Mr. Yager to invest her 401(k) funds for years 2000, 2001 and 2002 in a fund that was not losing money. However, she did not do so, electing to invest 50% into the Euro-Pacific Growth Fund and 50% into the Growth Fund for each of those years. R.25, Ex.3 at 1-3. As noted above, the EuroPacific Growth Fund lost money in 2000, and both the EuroPacific Growth Fund and the Growth Fund lost money in 2001 and 2002. No. 04-4258 17 action that would have been better than the one selected by Mr. Yager. Finally, Mr. Yager did not breach his duty in allowing plan participants to direct their investments. We previously have stated that fiduciaries must communicate “material facts affecting the interests of plan participants or beneficiaries,” even when the participants or beneficiaries do not ask for such information. Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 590 (7th Cir. 2000). Mr. Yager set up an informational meeting each year at which Mr. Erskine would discuss the various funds’ performance and outlook and at which materials on fund performance would be distributed. Additionally, the materials with information about the various funds were left in the company break room, so that all employees would have access to the information. Although Ms. Jenkins claims that Mr. Yager violated his fiduciary duty by failing to review each participants’ investment directions throughout the year to ensure they were appropriate, we have held that ERISA does not require “plan administrators to investigate each participant’s circumstances and prepare advisory opinions for literally thousands of employees.” Id. at 590-91 (citing Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 817-18 (7th Cir. 1997)).7 Mr. Yager provided his employees with the necessary information to enable them to direct the invest- 7 While Bowerman and Chojnacki refer to the duty to inform employees about health benefits and severance benefits, not the duty to inform employees as to the prudent way to invest their 401(k) funds in a participant-directed plan, the fiduciary duty at issue is the same as in this case: to what extent fiduciaries must communicate material facts affecting the interests of plan participants. See Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 590 (7th Cir. 2000); Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 817-18 (7th Cir. 1997). 18 No. 04-4258 ment of their 401(k) funds among four different funds, including yearly employee meetings with Mr. Erskine. Therefore, he did not breach his fiduciary duty by failing to provide adequate information.