COLLECTED WISDOM™ on Court and Legal Actions Related to Retirement Plans

A directory and index of articles that review what is happening in the courts and legal system.

Can Duties of Prudence and Loyalty Diverge?: Podcast

A federal judge, after a detailed four-day bench trial involving multiple witnesses and extensive evidence, has concluded that plan fiduciaries can breach their duty of loyalty to plan participants even when they follow a prudent process. This decision, discussed by Nevin Adams and Fred Reish in this Podcast, indicates a significant legal nuance where meeting procedural prudence does not absolve fiduciaries from their loyalty obligations. The implications of this ruling are critical for retirement plan fiduciaries, as it suggests that merely adhering to prudent practices may not be sufficient to protect them from potential liability regarding loyalty to participants.

Source: Napa-net.org, January 2025

Fiduciary Committees as Parties to a Vendor Contract

Practitioners often advise creating a fiduciary committee to manage ERISA-covered employee benefit plans for several reasons. By designating the committee as the responsible party for functions like plan administration, monitoring, and compliance, the governance structure aligns with the contractual responsibilities. This approach can help differentiate the committee's role from that of the company or individuals, potentially shielding them from being treated as fiduciaries to the plan and managing liability risks.

Source: Morganlewis.com, January 2025

Texas District Court's Decision in 401k Case Has Wide-Ranging Implications for Plan Fiduciaries

On January 10, 2025, the U.S. District Court for the Northern District of Texas ruled in the case of Spence v. American Airlines, Inc., finding that fiduciaries of two American Airlines 401k plans breached their duty of loyalty. The court concluded that the fiduciaries failed to adequately monitor and address the impact of BlackRock Institutional Trust Company's use of shares in the plans' index funds to further its Environmental, Social, and Governance initiatives, prioritizing socio-political outcomes over financial returns. This ruling marks a significant development in the ongoing debate regarding ESG investments within retirement plans and raises important implications for ERISA fiduciaries and plan sponsors.

Source: Jw.com, January 2025

Get a Grip Over Hiring an ERISA Attorney

The author, a lawyer, acknowledges the negative reputation lawyers often have, which can deter plan sponsors from hiring them, particularly ERISA attorneys. Despite the common jokes and stereotypes about lawyers, the author argues that it's important for retirement plan sponsors to overcome their apprehension and seek the assistance of an ERISA attorney when necessary. The article aims to explain the circumstances and reasons for hiring such legal expertise.

Source: Jdsupra.com, January 2025

An Emerging Trend in ERISA Class Action Litigation: 401k Forfeiture Suits

Recently, there has been an increase in ERISA class actions challenging the practice of using 401k plan forfeitures, which occur when employees leave before employer contributions vest. Traditionally, these forfeited amounts remain within the 401k plan and can offset future employer contributions, a practice deemed acceptable by regulatory guidance. However, plaintiffs are now arguing that this practice violates various ERISA provisions. Over 30 lawsuits have been filed against companies of all sizes, though none have reached a final judgment yet. Given the nascent state of these claims and the unclear legal landscape, plan sponsors and fiduciaries must adopt risk mitigation strategies. This should include reviewing their plan's forfeiture terms to ensure compliance with plan provisions.

Source: Hklaw.com, January 2025

Issues to Watch in 2025's ERISA Litigation Landscape

In 2024, there was a notable increase in class action filings under ERISA, with 136 new cases, which is higher than in 2023 but still below the 2020 record of over 200. The continuation of this trend into 2025 will likely hinge on the resolution of key legal issues. This Law360 article by Groom principals discusses what to expect for ERISA litigation in 2025, highlighting potential increases in health plan litigation, developments in excessive fee and forfeiture cases, as well as pension plan litigation.

Source: Groom.com, January 2025

Cornell Retirement Plan Dispute Tees Up Circuit Split at SCOTUS

The US Supreme Court will hear arguments regarding Cornell University's retirement plan, which may clarify the requirements for employees challenging 401k service provider fees under ERISA. The case addresses whether plaintiffs must include exemptions for prohibited transactions in their complaints or if these are defenses the plan fiduciary must prove. The outcome could significantly impact workers' ability to pursue claims against retirement plan service providers, with a ruling against Cornell potentially opening the door for more claims and settlements, while a ruling in favor could hinder efforts to address management issues.

Source: Groom.com, January 2025

401k Plan Fiduciaries Breached ERISA's Duty of Loyalty by Allowing ESG Interests to Influence Management of the Plan

Last week, Judge Reed O'Connor of the U.S. District Court for the Northern District of Texas issued a significant ruling regarding environmental, social, and corporate governance investing in ERISA-covered retirement plans. In his 70-page opinion in the case of Spence v. American Airlines, Inc., he found that American Airlines' 401k plan fiduciaries breached their duty of loyalty by allowing ESG interests to influence plan management, but did not breach their duty of prudence. The ruling has generated considerable media attention and varying opinions on its implications for ESG investing in retirement plans.

Source: Erisapracticecenter.com, January 2025

The Cornell Prohibited Transaction Case is ERISA's Most Absurd Case: Opinion

The Encore Fiduciary Guide discusses the Schlichter firm's appeal to the Supreme Court after losing an excessive fee case against Cornell University. They aim to reframe their claim from fiduciary imprudence to a prohibited transaction, avoiding the need to prove that fees are excessive. If successful, this could lead to an increase in ERISA class action abuses, granting plaintiff law firms the ability to conduct audits on any plan sponsor. This marks a significant shift in ERISA litigation, with plaintiff firms moving away from claims of participant advocacy and focusing on litigation tactics.

Source: Encorefiduciary.com, January 2025

"Disloyal, Not Imprudent": Is the American Airlines Decision Consistent With ERISA?

A Texas federal district court has ruled that American Airlines breached its fiduciary duty of loyalty but not its duty of prudence regarding its $26 billion 401k plan, which was influenced by environmental, social, and governance strategies. The court concluded that the airline's engagement with BlackRock for managing assets violated the fiduciary requirement to act in the best interests of plan participants, as outlined in ERISA. However, the court found insufficient evidence to prove a breach of the prudence rule, stating that American Airlines acted consistently with industry practices. This decision highlights a controversial distinction between loyalty and prudence, which critics argue is inconsistent with ERISA's statutory obligations since both are integral to a fiduciary's duty under ERISA section 404(a)(1)(A).

Source: Cohenbuckmann.com, January 2025

Second Circuit Adopts "Meaningful Benchmark" Pleading Standard in ERISA Cases

This article examines the Singh case and its implications for excessive fee claims in retirement plans. It highlights the "meaningful benchmark" standard, which requires plaintiffs to demonstrate sufficient similarity between their plan and other comparable plans with lower fees -- a standard upheld by the Eighth and Tenth Circuits and adopted by the Second Circuit with additional specific requirements. In the Singh case, former employees alleged that the fiduciaries of their 401k plan failed to act prudently by allowing participants to incur high recordkeeping fees, suggesting that the fiduciaries could have secured better pricing by examining comparable plans. Ultimately, the case challenges the fiduciary process tied to evaluating and approving recordkeeping fees.

Source: Spotlightonbenefits.com, January 2025

401k Excessive Fee Litigation Spiked to "Near Record Pace" in 2024

In 2024, there was a significant 35% increase in ERISA excessive fee class action litigation, with a notable surge in filings during the latter half of the year, approaching record levels. This uptick followed a quieter 18-month period starting in January 2023, during which plaintiff firms managed a backlog of cases. Many older cases have been settled after three years of record settlements, leading to the emergence of new legal theories. These include innovative claims such as forfeiture issues in defined contribution plans and new challenges related to wellness programs, excessive fees, and Affordable Care Act fraud involving defined benefit plans. This summary highlights the key developments in ERISA litigation for 2024.

Source: Planadviser.com, January 2025

401k ESG Lawsuit Order Cites 'Cartel-Like Behavior,' Could Prompt More Litigation

Plaintiffs have successfully sued American Airlines for breaching its fiduciary duties related to ESG considerations in the proxy-voting process of its $25 billion 401k plan, particularly for selecting BlackRock as an asset manager. A US District Court Judge found that the airline allowed corporate and BlackRock's ESG interests to influence plan management. This decision could prompt more lawsuits against 401k sponsors regarding ESG practices. However, it's uncertain if the plaintiffs can demonstrate financial harm to plan participants from BlackRock's involvement. While there was a ruling on breach of duty of loyalty, the judge did not find evidence of breach of prudence.

Source: Investmentnews.com, January 2025

Loper Bright: Reshaping the ERISA Regulatory Landscape

Under the Loper Bright decision, federal courts are now required to apply independent judgment regarding whether federal agencies have acted within their statutory authority, moving away from the previous Chevron deference standard that allowed agencies more interpretative leeway. This change, exemplified in the Corner Post case, facilitates challenges to longstanding regulations and agency decisions, even when statute of limitation issues arise. As a result, the DOL may face increased scrutiny over its interpretations of ERISA, leading to potential challenges to DOL regulations in the ERISA space starting in 2025 and beyond.

Source: Reedsmith.com, January 2025

American Airlines Violated Federal Law By Using 401k Plan to Promote ESG Funds, Judge Rules

A Texas federal judge, Reed O'Connor, ruled that American Airlines violated federal law by directing its employee retirement plans toward investment firms focused on environmental, social, and governance products. This decision marks a significant victory for opponents of progressive investing. The judge found that the airline breached its fiduciary duty of loyalty under ERISA by hiring BlackRock to manage its $26 billion 401k plan. However, he did not find that American Airlines violated its duty of prudence, noting that the airline acted in line with industry practices. The ruling followed a four-day trial initiated by a lawsuit led by pilot Bryan Spence, who contended that American Airlines' choice of BlackRock, which emphasizes political agendas alongside financial returns, was inappropriate.

Source: Nationalreview.com, January 2025

Kimberly-Clark Settles 401k Excessive Fee Case for $2.25M

Kimberly-Clark has agreed to a $2.25 million settlement in an ERISA lawsuit concerning excessive fees in the company's 401k plan. The case, Seidner et al. v. Kimberly-Clark Corp. et al., has been ongoing for three years, and the settlement was reached through mediation. The plaintiffs, two former employees, are seeking preliminary court approval for the settlement in the U.S. District Court for the Northern District of Texas. They chose to settle to avoid the prolonged uncertainty of litigation and potential appeals, acknowledging that the settlement represents only about 15% of the estimated overall losses suffered by plan participants due to mismanagement of the retirement plan.

Source: Hallbenefitslaw.com, January 2025

Groups Call On Supreme Court to Uphold Cornell University Decision to Stem Frivolous Lawsuits

The U.S. Supreme Court is set to hear the case Cunningham v. Cornell University, which addresses a disagreement among circuit courts regarding whether a plaintiff must demonstrate more than just the occurrence of a "prohibited transaction" to survive a motion to dismiss. Several retirement industry groups, including the ERISA Industry Committee, the American Benefits Council, and the SPARK Institute, have filed an amicus brief supporting the U.S. 2nd Circuit Court of Appeals’ ruling. This ruling asserts that simply identifying a "prohibited transaction" is not enough for a lawsuit to proceed; plaintiffs must also claim that applicable statutory exemptions do not apply.

Source: Planadviser.com, January 2025

Pru's Prudent Process Prevails in Proprietary 401k Fund Suit

A lawsuit against Prudential regarding its GoalMaker-managed account platform has been dismissed. The suit, initiated in September 2022, alleged that Prudential's fiduciaries improperly filled the 401k plan with proprietary mutual funds, neglected to monitor their performance, and failed to disclose recordkeeping fees. This allegedly led to excessive fees being paid to Prudential and significant losses for the plan and its approximately 45,000 participants.

Source: Napa-net.org, January 2025

$6.9 Million Settlement Struck in Northern Trust Excessive Fee Suit

The parties in an excessive fee lawsuit regarding Northern Trust's Focus Funds in its 401k plan have reached a settlement agreement, pending court approval. The proposed settlement amount is $6.9 million, which will be used to cover recoveries for plan participants, attorneys' fees and costs for class counsel, administrative expenses, and service awards for the plaintiffs.

Source: Napa-net.org, January 2025

Amazon Employees File 401k Plan Forfeiture Complaint in Federal Court

Amazon.com Inc. and its 401k savings plan administrative committee are facing a lawsuit regarding the management of employee forfeiture funds, the largest such case against a company. In the case of Curtis v. Amazon.com, filed in the U.S. District Court for the Western District of Washington, plaintiff Cory Curtis claims that Amazon's fiduciaries improperly used millions in forfeited plan assets to cover the company's contributions instead of reducing administrative fees for over 20,000 participants from 2018 to 2023. The lawsuit, represented by Terrell Marshall Law Group PLC, argues that this practice allowed Amazon to save millions in contribution costs.

Source: Planadviser.com, January 2025

Federal District Court Dismisses Another 401k Forfeitures Suit

Since September 2023, at least 25 lawsuits have been filed arguing that the decision to use 401k forfeitures to offset plan expenses instead of reducing plan sponsor contributions is a fiduciary choice under ERISA. In the most recent case, Barragan v. Honeywell Int'l, Inc., the U.S. District Court for New Jersey dismissed the plaintiff's complaint without prejudice, allowing for the possibility of an amended complaint. This decision marks the seventh ruling on a motion to dismiss a 401k plan forfeiture lawsuit, with only two cases successfully surviving such motions. This article is a review of the ruling.

Source: Beneficiallyyours.com, January 2025

How Johnson v. Parker-Hannifin Impacts Professional Fiduciaries and 401k Plan Sponsors

This article examines the implications of the Johnson v. Parker-Hannifin case, which involves allegations of the company's failure to adequately monitor investments, resulting in the use of high-cost share classes. This case has significant relevance for professional fiduciaries and 401k plan sponsors. Initially dismissed by a lower court, the plaintiffs appealed, and the U.S. Court of Appeals for the Sixth Circuit found merit in their claims, subsequently remanding the case for further proceedings. The article also notes a few steps 401k plan sponsors can take to better protect themselves.

Source: Fiduciarynews.com, December 2024

Retirement Plan Forfeitures: A New Wave of Class Action ERISA Litigation

In the past year, numerous class action lawsuits have been filed against major U.S. companies regarding the alleged misuse of retirement plan forfeitures. The trend started in September 2023 with a lawsuit against Thermo Fisher Scientific, which claimed that the company's fiduciaries violated ERISA by using plan forfeitures to offset employer-matching contributions instead of covering administrative costs. While U.S. Treasury rules have allowed this practice for years, the plaintiffs argued it breached ERISA's fiduciary duties of loyalty and prudence. This article provides an overview of plan forfeitures and their regulation, analyzes the claims and defenses presented in these lawsuits, and summarizes initial court rulings. It concludes by offering recommendations for plan fiduciaries to reduce the risk of future legal challenges.

Source: Truckerhuss.com, December 2024

Honeywell 401k Case Dismissed

A federal court has ruled in favor of Honeywell, dismissing a lawsuit that accused the company of breaching fiduciary duties related to its 401k plan by using forfeitures to offset employer contributions. The plaintiff, Luciano Barragan, alleged that Honeywell violated ERISA by breaching fiduciary duties, abusing its authority, and engaging in prohibited transactions. However, the court agreed with Honeywell that it followed the plan guidelines and Treasury regulations, leading to the dismissal of the case without prejudice. Barragan has 30 days to amend the complaint to address the identified deficiencies.

Source: Psca.org, December 2024

A Deeper Dive Into the DOL's "CIA" Activities

Rep. Virginia Foxx has called for an investigation into the DOL's use of common interest agreements (CIAs) to share information from its investigations with plaintiffs in ERISA-related litigation. However, many ERISA attorneys, including those from both sides of the legal spectrum, expressed unfamiliarity with this practice and the associated statute. Alex Ryan, a partner at Willkie Farr & Gallagher, stated he learned about CIAs only through recent reports and noted that speculation existed about their use. Jerry Schlichter, a prominent attorney, confirmed that his firm has never utilized CIAs with the DOL and generated information independently. Similarly, Nate Ingraham from Thompson Hine also reported a lack of awareness regarding the DOL's use of these agreements. Overall, the responses suggest that CIAs may not be a widespread practice within the DOL.

Source: Napa-net.org, December 2024

A Modest Proposal for Solving (At Least Part of) the ERISA Class Action Litigation Crisis

The article discusses the ongoing tension between legitimate excessive fee class actions against plan sponsors and fiduciaries and the high costs associated with defending such claims, particularly when they are deemed to have little merit. The author proposes a balanced approach: while encouraging plan sponsors and fiduciary liability insurers to take cases to trial, there is an alternative strategy that could be less costly in the short term. This strategy involves implementing a thoughtful litigation campaign that raises barriers to lawsuits and reduces costs for those that proceed. Additionally, the author suggests treating class action ERISA litigation as a commoditized type of litigation, allowing for more efficient and cost-effective handling of these cases.

Source: Bostonerisalaw.com, December 2024

UnitedHealth Group Agrees to Historic $69 Million 401k ERISA Settlement

UnitedHealth Group has agreed to pay $69 million to settle the Snyder v. UnitedHealth Group ERISA class action lawsuit concerning underperforming investment options in its 401k plan. This settlement is reportedly the largest in an ERISA case of its kind. The settlement is pending review and approval by Judge John R. Tunheim of the District Court for the District of Minnesota, with a hearing date yet to be determined.

Source: 401kspecialistmag.com, December 2024

"Astronomical" Claims Crash Again in Excessive Fee Suit

This article discusses a ruling in a legal case involving excessive fee claims against a retirement plan. A federal court dismissed the lawsuit, which had made "astronomical" allegations about the fees charged to participants, stating that the claims were not substantiated. The decision highlights the challenges plaintiffs face in proving excessive fee claims and reinforces the need for credible evidence. The article emphasizes the importance of this ruling in shaping future litigation related to retirement plan fees.

Source: Napa-net.org, December 2024

DOL Supports Participants Against Cornell in Supreme Court Case Over DC Plan Management

The DOL has requested the Supreme Court's support for former participants in two Cornell University 403b plans who claim the plans charged excessive fees and that their contracts with recordkeepers violated federal law. Oral arguments for the case, Cunningham et al. vs. Cornell University et al., are scheduled for January 22. This case, which has been ongoing for eight years, is seen as an opportunity for the Supreme Court to clarify differing interpretations of ERISA's prohibited transactions rules by various appeals courts. The DOL, represented by Solicitor General Elizabeth Prelogar, submitted an amicus brief on December 2, highlighting the central issue of whether plaintiffs need to prove defendants engaged in prohibited transactions, or if fiduciaries must demonstrate they fall under ERISA exemptions.

Source: Pionline.com, December 2024

Kimberly-Clark Will Pay $2.25 Million to Settle a 401k Recordkeeping Fees Lawsuit

Kimberly-Clark Corp. has agreed to pay $2.25 million to settle a class-action lawsuit brought by former employees who accused the company and its 401k plan fiduciaries of imposing high recordkeeping fees and failing to adequately monitor those fees. The settlement, filed on December 2 in a U.S. District Court in Dallas, is pending court approval and was reached through mediation. The lawsuit, initiated in April 2021, claimed that the 401k plan's fees were excessive compared to similar plans, violating ERISA.

Source: Pionline.com, December 2024

USERRA Case Highlights Employer Defenses to Allegations of Anti-Military Bias

In Porter v. Trans State Holdings, Inc., the federal district court dismissed a Naval Reserve pilot's USERRA lawsuit claiming discrimination and retaliation regarding promotional opportunities and 401k contributions due to anti-military bias. USERRA protects military personnel from such discrimination. The court's decision emphasizes that a company's documented commitment to hiring veterans and supporting current service members can be an effective defense against USERRA claims, providing useful guidance for employers.

Source: Littler.com, December 2024

Fudamental Unfairness: Sixth Circuit Decision Addresses the Premature Dismissal of ERISA Actions

The author comments that the Sixth Circuit's decision in Johnson v. Parker-Hannifin Corp. signals a potential trend towards greater protections for plan participants in fiduciary litigation, particularly by revisiting issues of pleading plausibility and the burden of proof under ERISA. With the Supreme Court set to consider the burden of proof in the Cunningham v. Cornell case, 2025 might be pivotal for fiduciary litigation. The author highlights that the majority opinion in Parker Hannifin could strengthen claims for equitable treatment of plan participants, depending on how effectively the plaintiffs' bar approaches the case.

Source: Fiduciaryinvestsense.com, December 2024

The Sixth Circuit Decision Allows a Performance Standard to Judge the Fiduciary Prudence of 401k Plan Investment Decisions

The Sixth Circuit's Parker-Hannifin decision permits claims of fiduciary breach for investment underperformance after just eleven months, even without a meaningful benchmark to assess prudence. Plaintiffs have compared Northern Trust's conservative strategy to higher-risk, top-performing funds. The article notes that if upheld, fiduciaries could be liable for failing to select top performers or exceed the S&P 500, regardless of their actual investment strategy. The dissent argues that ERISA sets "standards of conduct, not standards of performance," indicating that this ruling could lead to speculative class action lawsuits based on unrealistic performance expectations.

Source: Encorefiduciary.com, December 2024

Eleven Republican AGs Sue BlackRock, State Street, Vanguard in ESG Case

Eleven states have filed a complaint against BlackRock Inc., State Street Corp., and Vanguard Group Inc. in the U.S. District Court for the Eastern District of Texas. The states accuse these asset managers of anti-competitive practices aimed at constricting coal markets and misleading investors regarding funds that do not prioritize environmental, social, and governance factors. The complaint alleges that these companies held significant stakes in U.S. coal firms and influenced them to shift towards green energy goals. The plaintiffs argue that the asset managers' involvement in initiatives like Climate Action 100+ and the Net Zero Asset Managers Initiative has manipulated coal output, resulting in higher costs for coal-powered electricity.

Source: Planadviser.com, November 2024

Sixth Circuit Clarifies That Plaintiffs Must Plead, Not Prove, Excessive Fees

The article discusses a ruling from the Sixth Circuit Court of Appeals regarding litigation over excessive fees in retirement plans, specifically focusing on the distinction between pleading standards and the burden of proof for plaintiffs in such cases. The court clarified that plaintiffs in cases alleging excessive fees do not need to definitively prove that fees are excessive at the pleading stage. Instead, they must only sufficiently plead that the fees are excessive based on relevant facts. This ruling has implications for how participants can challenge fee structures in retirement plans, emphasizing the importance of the initial pleading stage in these legal matters. Overall, it contributes to the ongoing dialogue regarding fiduciary responsibilities and transparency in retirement plan management.

Source: Yourerisawatch.com, November 2024

DC Plan Sponsors and Forfeiture Lawsuits Webinar: What You Need to Know

In a recent webinar hosted by NEPC's Dan Beaton and Groom Law Group's Jennifer Eller, the discussion focused on the surge of lawsuits involving defined contribution plan forfeiture accounts. They explored the allowed uses of forfeitures and offered strategies for plan sponsors to minimize the risk of litigation in this area. The replay of the webinar is available here.

Source: Nepc.com, November 2024

Capital One Facing 401k Plan Forfeiture Suit

In a recent case, Capital One is facing a lawsuit regarding alleged forfeitures within its 401k plan. The lawsuit, filed by former employees, claims that the company improperly enforced a policy that led to the forfeiture of retirement plan benefits due to insufficient vested service. The plaintiffs argue that they were not adequately informed about the implications of the plan's provisions, which they believe was misleading and harmed their retirement savings. The outcome of this case may have significant implications for how companies manage their 401(k) plans and communicate with employees about their retirement benefits.

Source: Planadviser.com, November 2024

John Hancock, Not 401k Plan, Receives Fruit of Foreign Tax Credits in Pooled Investments

In a certified class action lawsuit, 401k plan trustees accused John Hancock Life Insurance Company of breaching fiduciary duties under ERISA. They claimed that John Hancock did not pass on foreign tax credits to the plans, resulting in a decrease in the plans' asset value, and argued that the company profited from these credits without disclosing this in contract terms. The plaintiffs asserted that this behavior constituted a prohibited transaction since the plans were burdened with double taxation. However, the court ruled that John Hancock was not acting as a fiduciary in managing the separate accounts for the retirement investments or when obtaining the foreign tax credits.

Source: Yourerisawatch.com, November 2024

Clorox Wins First Round in 401k Plan Forfeiture Lawsuit

A class action lawsuit by former Clorox employee James McManus regarding the company's handling of forfeited 401k funds was mostly dismissed by U.S. District Judge Yvonne Gonzalez Rogers. The judge ruled that McManus's breach of fiduciary duty claim under ERISA was too broad and required more specific details. McManus was given until November 12 to revise his complaint, emphasizing the need to demonstrate "special circumstances" affecting fund management, referencing a U.S. Supreme Court standard. McManus argued that Clorox improperly used forfeited contributions to offset the company's expenses, while Clorox maintained that reallocating forfeitures within the plan is permissible under ERISA.

Source: Planadviser.com, November 2024

Coca-Cola Southwest Faces Lawsuit Over Forfeitures, Target-Date Funds

Former participants of the Coca-Cola Southwest Beverages LLC 401k plan have filed a lawsuit alleging that the company breached its fiduciary duties under ERISA. The complaint, known as Ware et al. v. Coca-Cola Southwest Beverages LLC, claims that the company offered "underperforming" target-date funds and mismanaged forfeited 401k funds. Specifically, the plaintiffs allege that the J.P. Morgan TDFs provided by Coca-Cola SW were expensive and underperformed compared to similar funds and benchmarks. The case is being heard in the U.S. District Court for the Northern District of Texas.

Source: Plansponsor.com, November 2024

Pfizer Gets 401k Plan Fee Lawsuit Tossed

The U.S. District Court for the Western District of Michigan dismissed a lawsuit against Pfizer Inc. regarding alleged "unreasonable" recordkeeping and administrative fees. Judge Paul Maloney ruled that plaintiff Matthew Miller, a former employee, did not adequately support his claims and used a flawed methodology. As part of a joint agreement, Miller waived his right to appeal the dismissal, and Pfizer agreed not to pursue legal fees or costs from him.

Source: Planadviser.com, October 2024

ERISA Row Related to How Employers Use 401k Forfeitures Deepens

Since last fall, plaintiffs have initiated over twenty ERISA class actions alleging breaches of fiduciary duties concerning 401k plan forfeitures. Despite existing guidance from the Treasury Department and the Department of Labor, this new legal theory is gaining traction. Two preliminary rulings have permitted these forfeiture claims to advance, further encouraging this trend. However, two recent decisions, one addressing fiduciary discretion and the other exploring the limits of ERISA, provide valuable insights and nuanced discussions on the issue.

Source: Nixonpeabody.com, October 2024

"Flawed" Methodology, Comparisons Doom Excessive Fee Suit

In a recent case (Matthew A. Miller v. Pfizer Inc. et al.), a federal court dismissed an excessive fee lawsuit against a retirement plan, citing flawed methodology in the comparisons used by the plaintiffs. The court found that the plaintiffs failed to adequately demonstrate that the fees in question were excessive by relying on inappropriate benchmarks. The decision underscores the importance of using correct methodologies when challenging fees in retirement plans, as the court emphasized the need for precise and relevant comparisons to support claims of excessive charges. This ruling highlights the challenges plaintiffs face in proving their cases in similar lawsuits.

Source: Napa-net.org, October 2024

Northern Trust Reaches Tentative Settlement in 401k Suit

Northern Trust Co. has reached a tentative settlement regarding a class-action lawsuit related to the use of in-house target-date funds in its company benefit plan. The lawsuit, originating in 2021, involved six participants who alleged that the plan committee did not prudently select or monitor investment options for performance and fees. The plaintiffs specifically criticized the decision to retain 11 Northern Trust Focus Funds from the firm's asset management division. The settlement aims to resolve the long-standing dispute.

Source: Planadviser.com, October 2024

Federal Judge Refuses to Dismiss Intuit Lawsuit as 401k Forfeiture Suits Continue to Proliferate

A federal judge in California has declined to dismiss a lawsuit against Intuit, where retirement plan participants allege the company improperly used forfeited funds from its 401k plan. This ruling upholds key claims in the lawsuit and highlights a growing trend of 401k forfeiture cases under ERISA in federal courts. U.S. District Court Judge P. Casey Pitts allowed claims of breach of fiduciary duties based on the assertion that Intuit used unvested forfeited funds for matching contributions for new employees, rather than reducing overall plan expenses.

Source: Hallbenefitslaw.com, October 2024

Supreme Court to Decide ERISA Prohibited Transaction Dispute

On October 4, 2024, the Supreme Court agreed to hear the appeal in Cunningham v. Cornell University, which addresses discrepancies among U.S. Courts of Appeals regarding the pleading requirements for plaintiffs challenging the relationship between benefit plans and service providers under ERISA. By granting the plaintiff's petition for writ of certiorari, the Court aims to resolve this circuit split, with a decision expected next year as the current term has just begun.

Source: Groom.com, October 2024

Court Says '23 Budget Not Legally Enacted: Could that Affect SECURE 2.0?

A federal district court has determined that the Consolidated Appropriations Act of 2023, which includes SECURE 2.0, was passed in violation of the Constitution’s Quorum Clause. While this ruling currently does not affect SECURE 2.0, Allison Wielobob, Chief Legal Officer of the American Retirement Association, advises monitoring the situation for future implications.

Source: Asppa-net.org, October 2024

Another 401k Excessive Fee Suit Settles for Cash and Change

A $400 million retirement plan has reached a $1.5 million cash settlement in an excessive fee lawsuit. The suit, filed in 2022 against the fiduciaries of the Nova Southeastern University 401k plan, alleged that the plan included underperforming, higher-cost funds, as well as excessive recordkeeping fees, despite the availability of cheaper alternatives. Changes to the plan will also be implemented as part of the settlement.

Source: Napa-net.org, October 2024

Bank of America Faces ERISA Suit Claiming Misuse of Forfeited 401k Funds

Bank of America has been hit with a class action lawsuit claiming it misused forfeited 401k funds, allegedly violating its fiduciary duty under ERISA. Participants in the retirement plan argue that the bank improperly benefited from matching contributions that employees forfeited upon leaving the company. This lawsuit is part of a broader trend, with several major companies facing similar legal challenges across the country.

Source: Hallbenefitslaw.com, October 2024

Supreme Court to Review ERISA Prohibited Transactions

The U.S. Supreme Court will hear a case involving participants of Cornell University's retirement plan focusing on the burden of proof for prohibited transactions under ERISA. Lindsey Camp, an ERISA litigation partner at Holland & Knight, notes that the Court's decision to take the case highlights key issues regarding the pleading requirements for prohibited transaction claims, specifically whether plaintiffs must indicate any imprudent conduct related to the transaction in their complaints.

Source: Planadviser.com, October 2024

Nvidia Strikes a Settlement in Excessive Fee Suit

Despite numerous attempts to quash the suit, the parties in an excessive fee suit say they are close to working out a settlement.

Source: Napa-net.org, October 2024

Circuit Split Deepens With Home Depot's 11th Circuit ERISA Win

A three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit has upheld the dismissal of a 401k-plan mismanagement suit brought by plan participants in favor of Home Depot. The ruling affirmed a Georgia federal court's grant of summary judgment in the suit, in which plan participants claimed that the home improvement retailer violated ERISA in charging excessive fees and maintaining subpar investments.

Source: Hallbenefitslaw.com, October 2024

Recent Developments in Forfeiture Cases: Update

This article is the Wagner Law Group's sixth update reporting on and analyzing the nature of the "forfeiture" litigation claims raised by plaintiffs, the defenses asserted against them and the court opinions deciding the issues raised in these matters. In addition to providing an overview of the recent Thermo Fisher decision, this article also discusses the complaint filed against Knight Smith as well as a similar forfeiture complaint filed by the DOL in 2017.

Source: Wagnerlawgroup.com, October 2024

Why Does the DOL Allow ERISA Regulation Through Litigation By Plaintiff Lawyers

Why would America's plan sponsors continue to offer retirement plans with generous company matches if the trial bar is going to turn these voluntary benefits into liability traps? Just wait for a recession, and smart employers that want to reduce liability risk will eventually eliminate employee benefit plans that are targeted by the plaintiff trial bar. If you think this is an exaggeration, then you have not been watching the latest five trends of the plaintiff ERISA trial bar as they work to create novel fiduciary liability as America's de facto fiduciary liability regulators.

Source: Encorefiduciary.com, October 2024

Bid for Jury Trial Bounced in 403b Excessive Fee Suit

A long-running excessive fee suit involving a university 403b plan -- and is incredibly, still running -- won't have a jury trial, according to a new federal court ruling. The suit was brought by participants in plans of New York University. This case reminds us that litigation frequently involves a series of motions and countermotions, often small procedural victories that contribute little to the merits, but can influence the eventual outcome of the case.

Source: Ntsa-net.org, September 2024

Defendants Secure Another Win on Discretionary Use of 401k Plan Forfeitures

On September 19, 2024, the Southern District of California dismissed claims brought by a 401k plan participant against Thermo Fisher Scientific regarding the use of forfeitures to offset future employer contributions. As summarized in this article, the decision largely tracks a decision in favor of Hewlett Packard earlier this year, furthering a split in rulings on the issue by federal courts in California.

Source: Groom.com, September 2024

DOL vs. IRS Rules: Courts Asked to Decide How 401k Plans Can Use Forfeiture Assets

What started as a small law firm filing a handful of suits against 401k plans' use of forfeited funds has metastasized into a broad attack on sponsors that raises questions about reducing participants' expenses. It's a trend of law firms filing more lawsuits seeking to use DOL regulations regarding fiduciary duty to supersede IRS rules. The eruption of lawsuits has been accompanied in the early stages by divergent federal court decisions that don't give plan sponsors -- and their ERISA attorneys -- a clear picture of how to defend against this type of lawsuit.

Source: Wagnerlawgroup.com, September 2024

Chevron Explained

On June 28, the U.S. Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo. The court overruled its own 1984 holding in Chevron v. Natural Resources Defense Council, in which it stated that the federal courts, in many cases, should defer to agency interpretations of ambiguous federal statutes. Here, ERISA expert David Kaleda unpacks the Supreme Court decision that gives the courts more weight in areas that include employee benefits law.

Source: Planadviser.com, September 2024

Multi-Billion-Dollar 403b Plan Settles Excessive Fee Suit

"After years of hard-fought litigation," a multi-billion-dollar 403b plan has struck a deal in an excessive fee suit. This suit involves plans of the MITRE Corporation Tax Sheltered Annuity Plan and the Qualified Retirement Plan with more than 23,000 participants and more than $8 billion in assets between them.

Source: Ntsa-net.org, September 2024

A Growing Trend: Fiduciary Secures Trial Victory in Excessive Fee Litigation

On August 22, 2024, the Central District of California found in favor of Prime Healthcare after a bench trial on breach of fiduciary duty claims related to the monitoring of recordkeeping expenses and selection of investments. This decision is another example of district courts across the country rejecting excessive recordkeeping fees and imprudent investment claims after trial. It also provides a notable rejection of the testimony from certain experts that the plaintiffs' bar has used in recent years to support these types of claims.

Source: Groom.com, September 2024

DOL Seeks to Keep ERISA Investment Advice Regulations in Place

The DOL recently filed a reply brief in a lawsuit brought by insurance industry groups seeking to block new regulations that expand the definition of fiduciary under ERISA. In its brief, the DOL asked the Court to deny a motion for a preliminary injunction that would prevent the agency from implementing and enforcing the new regulations.

Source: Hallbenefitslaw.com, September 2024

Lawsuit Related to Use of Forfeitures Dismissed

On September 5, 2024, a federal court for the Eastern District of Virginia dismissed claims that a 401k plan participant asserted against BAE Systems regarding the use of forfeitures to reduce future employer contributions. The Court's ruling is a significant victory for defendants in the newest wave of ERISA litigation. The decision underscores that including plan terms that eliminate discretion by directing how forfeitures are to be used can mitigate litigation risk.

Source: Groom.com, September 2024

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