In Re WorldCom, Inc. ERISA Litigation

**What Happened** WorldCom employees sued Merrill Lynch, which managed their retirement plan investments, claiming the company failed to protect their 401(k) accounts when WorldCom's stock price collapsed. The employees argued that Merrill Lynch should have stopped investing in or sold WorldCom stock because it had inside information about the company's financial problems that regular investors didn't know about. **What the Court Decided** The court ruled in favor of Merrill Lynch. The judge found that the employees couldn't prove Merrill Lynch had special insider information about WorldCom's troubles, or that there were unusual circumstances that would have required the investment manager to take independent action to protect the retirement accounts by stopping WorldCom stock purchases or selling existing holdings. **What This Means for Workers** This ruling shows how difficult it can be for employees to win lawsuits against retirement plan managers when their employer's stock loses value. Workers cannot assume that investment companies managing their 401(k) plans will automatically protect them from losses in company stock, even during corporate scandals. Employees should consider diversifying their retirement investments rather than relying heavily on their employer's stock.