Nov. 26 (Bloomberg) -- U.S. Supreme Court justices signaled they may bolster the ability of 70 million participants in 401(k) and other retirement plans to file lawsuits claiming their accounts were mishandled.

In arguments today in Washington, the justices questioned business-group contentions that participants can sue only to enforce the rights of the entire plan, not to recover losses incurred by a single account. The court is considering the case of a man who says he lost almost $100,000 because his employer didn't make investment changes he requested.

``I don't see why the multiple of the number of accounts has anything to do with it,'' Justice David Souter said.

The case will shape the rights of participants in so-called defined-contribution retirement programs -- a category that includes 401(k), employee stock ownership and profit-sharing plans. Those accounts hold $3.3 trillion in assets.

In the case before the justices, James LaRue says he tried to change the investments in his 401(k) plan in time to avoid the brunt of the 2001-02 stock market plunge. LaRue claims his employer, Dallas-based management-consulting firm DeWolff Boberg & Associates, didn't follow his instructions, costing almost $100,000.

The 4th U.S. Circuit Court of Appeals in Richmond, Virginia, barred the suit, saying it wasn't allowed under the 1974 Employee Retirement Income Security Act, known as ERISA.

Ginsburg Skepticism

DeWolff Boberg's lawyer, Thomas Gies, told the justices that ERISA entitles LaRue to a court order directing the plan to change his investments but not to recoup the money he says he lost. That drew skepticism from Justices Ruth Bader Ginsburg and Antonin Scalia, who said that type of court order likely would come too late.

``If you say, `I want these funds in this particular set of shares for this six-month period,' then two years later you can have that trade made?'' Ginsburg asked. ``I don't understand that.''

Justices Stephen Breyer, John Paul Stevens and Samuel Alito also aimed skeptical questions at Gies.

Critics say the lower court ruling would leave participants in defined-contribution plans with no recourse in the event their accounts are mishandled by the fiduciaries who administer the plan. The Bush administration is among those backing LaRue in the case.

``Absent money being returned to the plan, there can be no meaningful remedy for the breach that occurred,'' argued LaRue's lawyer, Peter K. Stris.

401(k) Plans

Offered by employers, 401(k) plans let workers put a percentage of their paychecks into a tax-deferred investment account.

LaRue sued DeWolff Boberg in 2004 in federal court in Charleston, South Carolina. A trial judge threw out the suit, and the 4th Circuit upheld that ruling on a 3-0 vote.

LaRue no longer works at DeWolff Boberg. In 2006, he closed his 401(k) account and withdrew the $119,000 balance.

The case is LaRue v. DeWolff Boberg, 06-856.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

Last Updated: November 26, 2007 14:19 EST