Aluminum Precision Stock Plan Cash Holding Suit Gets Green Light

A former Aluminum Precision Products Inc. worker is moving forward with a proposed class action challenging the maintenance of substantial cash holdings in the company’s employee stock ownership plan.

Aluminum’s ESOP committee may have violated ERISA’s prohibited transaction rules and the statute’s directive to invest prudently by keeping significant assets in cash equivalents and short-term treasuries, Judge Michael W. Fitzgerald of the US District Court for the Central District of California held Wednesday, denying a defense bid for judgment on the pleadings.

The committee argued that ESOPs—which invest primarily in the sponsoring employer’s stock—are exempt from the diversification requirement applicable ...