In Tatum, Nabisco and R.J. Reynolds Tobacco had merged together. Fourteen years later, the companies decided to split apart and spun off R.J. Reynolds. The 401(k) plan had included stock in both Nabisco and R.J. Reynolds as investment options. After the spin-off, the RJR plan fiduciaries decided to eliminate the Nabisco stock as an investment option, even though the plan document provided that participants could remain invested in the Nabisco stock but prohibited additional investment in it. After the investment was eliminated and the participants forced to divest, the Nabisco stock significantly increased in value.
The Fourth Circuit’s decision in Tatum v. RJR Pension Investment Committee is available here.
ERIC members and trial members can read more here.
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