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Supreme Court Rejects the Moench Presumption of Fiduciary Prudence in ESOPs

Fiduciaries of an ESOP are not entitled to any special presumption of prudence with regard to purchases or sales of employer securities, except as the duty of prudence relates to diversification of plan investments, the U.S. Supreme Court ruled June 25. In its unanimous decision in Fifth Third Bancorp v. Dudenhoeffer, the Court examined whether a lawsuit by participants against the ESOP fiduciaries in relation to decisions to hold and continue buying bank stock was properly dismissed because of a presumption that the ESOP fiduciaries had acted prudently, where public information indicated that continued investment in the bank’s stock was risky. In the most recent ASPPA asap

, Ilene Ferenczy of Ferenczy + Paul LLP offers her insights on this case and what the ruling means.