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.

Whole Foods Reaches Settlement in Excessive Fee Case

The parties in an excessive fee lawsuit involving the nearly $2 billion Whole Foods Market Growing Your Future 401k Plan have reached a settlement agreement. The participant-plaintiffs, represented by Capozzi Adler PC, had alleged that the plan's large size should have allowed for better fee arrangements and that failing to secure them constituted a breach of fiduciary duty. Following mediation on April 16, 2025, the parties agreed in principle to resolve the case.

Source: Psca.org, April 2025

The Supreme Court Delivers Troubling Decision for ERISA Excess Fee Cases

On April 17, 2025, the U.S. Supreme Court issued a unanimous ruling making it harder for defendants to dismiss excess fee cases involving 401k or 403b plans at early litigation stages, potentially leading to more costly and burdensome discovery processes. While the Court recognized this could raise litigation costs for employers, it suggested some alternative measures for lower courts to filter out meritless cases, though these measures are not widely used and their adoption remains uncertain. Consequently, the ruling may increase litigation expenses for plan sponsors and could also drive up fiduciary liability insurance premiums, even for plans not currently facing excess fee claims.

Source: Ktslaw.com, April 2025

High Court's Cornell Ruling Stands to Supercharge 401k Suits

William Delany, principal, and co-chair of the Groom's litigation group, was featured in this Bloomberg Law article discussing the Supreme Court's Cornell ruling. He highlighted that without proactive measures and legislative action, plan sponsors, service providers, and regulated entities could face overwhelming ERISA litigation, hindering innovation in the retirement plan industry.

Source: Groom.com, April 2025

The Cornell Supreme Court Decision Sanctions ERISA Fiduciary-Breach Lawsuits Without Proof of Wrongdoing

Jerome Schlichter, a leading figure in excessive fee ERISA class action lawsuits, has achieved three unanimous U.S. Supreme Court victories in cases against Intel, Northwestern University, and Cornell University, with no justice ever ruling against his novel fiduciary liability theories. However, according to the article's author, his latest case against Cornell has pushed excessive fee litigation to an extreme by securing a ruling that allows filing ERISA-prohibited transaction claims with minimal allegations -- simply that a plan contracted a service provider -- without needing any proof of wrongdoing or excessive fees. This contrasts with breach-of-fiduciary duty claims, which require a higher level of evidence.

Source: Encorefiduciary.com, April 2025

U.S. Chamber Weighs in on 401k Excessive Fee Suit

The U.S. Chamber of Commerce and retirement trade associations have supported fiduciary defendants in a recent excessive fee ERISA class-action suit, describing it as part of a broader trend aimed at securing costly settlements. In the case against Telephone and Data Systems, Inc. Tax Deferred Savings Plan, the court dismissed the suit, with Judge Rebecca Ebinger ruling that the plaintiffs failed to allege specific, identifiable breaches of fiduciary duty. Instead, the plaintiffs only pointed to lower expenses in other plans to infer a possible breach, which was insufficient to proceed.

Source: Asppa-net.org, April 2025

Supreme Court Lowers Bar to Pleading Prohibited Transactions, Despite "Serious Concerns" of Meritless Litigation

In a unanimous decision reversing the dismissal of claims related to fees paid to defined contribution plan recordkeepers, the Supreme Court ruled that ERISA's prohibited transaction exemptions are affirmative defenses. Therefore, plaintiffs are not required to include these exemptions in their initial pleadings to state a valid claim. Although the Court recognized that this ruling might enable some plaintiffs to overcome dismissal with minimal allegations, it determined that concerns about a potential rise in meritless lawsuits do not outweigh the clear language and framework of the statute.

Source: Seyfarth.com, April 2025

Supremes Back Plaintiffs in Cornell ERISA Burden of Proof Standard

The U.S. Supreme Court ruled unanimously in favor of retirement plan participants who sued Cornell University over excessive fees in its 403b plan. The decision clarified that under ERISA, plan fiduciaries must both plead and prove exemptions to prohibited transactions. Additionally, plaintiffs challenging such transactions do not need to specify whether statutory exemptions apply in their complaints, marking a significant win for employees.

Source: Napa-net.org, April 2025

U.S. Chamber Pushes Back on 401k Excessive Fee Suit Appeal

The U.S. Chamber of Commerce and several retirement trade associations defended fiduciary defendants in a recent excessive fee lawsuit, claiming it is part of a larger trend of ERISA class-action complaints seeking costly settlements. Judge Rebecca Ebinger dismissed the lawsuit last November, stating the plaintiffs failed to provide proper benchmarks for comparing expenses, which hindered their claims of breached fiduciary duties. The plaintiffs have since appealed the dismissal.

Source: Napa-net.org, April 2025

Court Finds American Airlines Liable for Breach of Fiduciary Duty of Loyalty to Its 401k Plans

In the case of Spence v. American Airlines, Inc., U.S. District Court Judge O'Connor concluded that American Airlines breached its fiduciary duty of loyalty under ERISA after a four-day bench trial. Unlike typical excessive fee cases related to 401k plans, this case centered on American Airlines' relationship with BlackRock and its ESG proxy voting policies, rather than high investment management fees. The court found that while American Airlines prudently selected and maintained BlackRock as its investment manager, it acted disloyally by letting its corporate interests interfere with its fiduciary responsibility to monitor BlackRock.

Source: Truckerhuss.com, April 2025

AT&T Motion Calls Out Forfeiture Suit "Bandwagon"

Claiming that the "plaintiff is jumping on a bandwagon of cookie-cutter plan forfeiture challenges recently brought against dozens of large plans," AT&T has filed a motion to dismiss the suit. The lawsuit argues that this approach breaches ERISA's fiduciary duties, violates the anti-inurement provision, and constitutes prohibited transactions under ERISA. AT&T characterizes the suit as a generic challenge, akin to many others filed recently.

Source: Napa-net.org, April 2025

DOL's New Retirement Security Rule Remains on Hold as Agency Pauses Appeals

The DOL has requested the U.S. Court of Appeals for the Fifth Circuit to pause its appeals regarding two federal court cases that challenge its new Retirement Security Rule. This follows two orders from July 2024 that stayed the rule's implementation, originally set for September 2024. The rule aims to broaden fiduciary responsibilities under ERISA to include annuity sales, mandating financial advisors to act in their client's best interests rather than being incentivized by perks from insurance and annuity companies. However, industry groups, such as the American Council of Life Insurers and the Federation of Americans for Consumer Choice, sued to block the rule. After the federal courts' stays, the DOL filed notices of appeal under the Biden administration.

Source: Hallbenefitslaw.com, April 2025

Employer Considerations as New 401k Lawsuit Includes Extensive Claims

A recent lawsuit involving Swiss Re's 401k plan features a wide range of allegations, underscoring the need for 401k plan fiduciaries to adhere to best practices. Regardless of the lawsuit's outcome, these practices are crucial for fiduciaries to defend against potential lawsuits and to minimize the risk of breaching their fiduciary duties. The article outlines several best practices for plan fiduciaries to implement.

Source: Employeebenefitslawblog.com, April 2025

What Patent Trolls Can Teach Us About Tackling Problems in the ERISA Class Action Industry: Opinion

The "America Invents Act" aimed to resolve issues in patent prosecution and litigation, effectively addressing the patent troll problem while balancing the interests of various stakeholders, including industries reliant on patents and patent holders. A similar approach could be taken to tackle excessive class action litigation related to ERISA plans, seeking to balance participants' access to the courts with the risks faced by plan sponsors. The key challenge remains finding the right balance in managing the issues caused by such litigation.

Source: Bostonerisalaw.com, March 2025

Lawsuit Against Lockheed Martin Criticizes Firm for Using In-House TDFs

Lockheed Martin Corporation and its subsidiary investment management company are facing a lawsuit from current and former participants in their 401k plans. The plaintiffs allege that the company breached its fiduciary duties of prudence and loyalty by utilizing an in-house service provider and affiliated target-date funds. The lawsuit criticizes Lockheed Martin for adopting a "DIY" approach to investments, resulting in the creation of ineffective private funds that charged excessive fees. It claims that the company prioritized its own benefit by using underperforming target-date funds with high fees in the retirement plans.

Source: Plansponsor.com, March 2025

Insurance Company Providing 401k Retirement Plans Not an ERISA Fiduciary With Respect to Foreign Tax Credits

In Romano v. John Hancock Life Insurance, the Eleventh Circuit ruled that John Hancock, which provided investment and recordkeeping services for 401k plans, does not qualify as an ERISA fiduciary regarding its handling of foreign tax credits. The Romano Law Plan, established by the Romanos, made contributions to a separate account distinct from John Hancock's general funds, rather than making direct investments. The Romanos filed claims asserting that John Hancock's management of the foreign tax credits constituted a breach of fiduciary duty under ERISA and violated prohibited transaction provisions. The court, however, determined that John Hancock was not acting as a fiduciary in this context.

Source: 11thcircuitbusinessblog.com, March 2025

Why America Needs a Specialized ERISA Court: Opinion

The differing rulings in the HP and Clorox forfeiture cases highlight the need for a specialized court dedicated to ERISA litigation. ERISA was intended to create a uniform framework for plan sponsors to offer voluntary benefits and to ensure predictable fiduciary responsibilities across the country. However, this predictability and consistency have not been achieved, as more than forty judges are making determinations on fiduciary duty breaches related to unvested plan contributions, and twelve judges are reviewing decisions regarding independent fiduciaries selecting private-equity backed life insurance for pension risk transfers. This situation calls for reform to standardize rulings under ERISA.

Source: Encorefiduciary.com, March 2025

BlackRock Lifepath TDF Suit Dismissed, Again

A federal judge has dismissed a lawsuit involving BlackRock Lifepath target date funds on behalf of participants in multiple 401k plans, including those from Citigroup Inc. and Genworth, among others. After allowing the plaintiffs three opportunities to strengthen their case, the judge dismissed the suit with prejudice, meaning it cannot be refiled. The plaintiffs were represented by Miller Shah LLP, while the defendants were the fiduciaries of the Cisco Systems Inc. 401k plan, who had previously responded to similar allegations in August 2023.

Source: Planadviser.com, March 2025

Swiss Re Group, Empower Targeted in Sweeping Fiduciary Breach Suit

A recent lawsuit brings forth extensive allegations of fiduciary breaches related to excessive fees, inappropriate share classes, poor selections of target-date funds, and the improper use of plan forfeitures and participant data. The suit accuses the Swiss Re Defendants of "failing to comply with ERISA’s fundamental principles," claiming they employed flawed methodologies that resulted in suboptimal outcomes. Furthermore, the allegations assert that they opted for costly, underperforming investment options rather than more affordable and superior alternatives, while also imposing exorbitant recordkeeping fees on the Plaintiffs.

Source: Napa-net.org, March 2025

Court Greenlights ERISA Forfeiture Case Against Clorox

The U.S. District Court for the Northern District of California has decided not to dismiss a class action complaint against The Clorox Company and its employee benefits committee concerning the 401k Plan. The plaintiff accuses Clorox of violating ERISA fiduciary duties by using plan forfeitures to offset non-elective contributions instead of lowering administrative costs for participants. The court previously dismissed the initial complaint but found the amended complaint adequately alleged breaches of loyalty and prudence under ERISA. The court noted that the plaintiff's claims of self-interest and lack of a reasoned decision-making process were plausible, allowing for an inference of liability based on motivations for loyalty and the thoroughness of decision-making for prudence claims.

Source: Millerchevalier.com, March 2025

Eleventh Circuit Confirms Foreign Tax Credits Owned by Insurance Company Not Plan Assets of 401k Plan

In late October 2024, the Eleventh Circuit Court of Appeals ruled in Romano v. Hancock Life Insurance Company that foreign tax credits generated from 401k plan investments in accounts owned by John Hancock Life Insurance Company are not considered "plan assets" under ERISA. Consequently, the Court determined that JHLIC was not a fiduciary under ERISA and did not violate any fiduciary duties or prohibited transaction rules by failing to pass these foreign tax credits on to its 401k plan clients.

Source: Erisapracticecenter.com, March 2025

An ERISA Journey for ESG Via American Airlines by Way of Utah?

In 2025, U.S. district court decisions highlighted the ongoing debate over the permissibility of integrating environmental, social, and governance goals into ERISA-governed investing. Supporters of ESG investing can reference "State of Utah v. Micone," which upheld the Department of Labor's 2022 "tiebreaker" approach favoring ESG considerations. Conversely, opponents might cite "Spence v. American Airlines," which determined that the defendants violated their duty of loyalty by allowing proxy votes that supported ESG initiatives not focused on the financial interests of plan participants. Although both cases involve similar legal principles, they emerged in distinct contexts, with private litigation likely having a more significant influence on future fiduciary practices than the litigation surrounding the DOL's regulatory stance.

Source: Wagnerlawgroup.com, March 2025

Recent Developments in Forfeiture Cases

This article examines recent developments in "forfeiture" litigation, focusing on claims made by plaintiffs, defenses raised by defendants, and court decisions on these matters. So far, five motions to dismiss have been ruled upon: two in favor of plaintiffs and three in favor of defendants, including a notable decision in the Thermo Fisher case. The article also reviews a new complaint against Knight Smith and a similar 2017 forfeiture complaint by the Department of Labor. Unlike other complaints, these recent pleadings assert that plan documents necessitate that forfeitures be used for plan expenses first before reducing employer contributions. The article raises the possibility that this new angle on forfeiture allegations could signal a trend in upcoming lawsuits.

Source: Wagnerlawgroup.com, February 2025

Lawsuit Alleges Empower Misused Participant Data for Cross-Selling

Former employees of Swiss Re American Holding Corp. have filed a lawsuit against the company, its board of directors, the employee pension plan committee, and the recordkeeper Empower for alleged breaches of fiduciary duties under ERISA. Specifically, Empower is accused of providing improper rollover recommendations and using participant data for cross-selling. The lawsuit seeks class-action status and covers the period since January 2019.

Source: Planadviser.com, February 2025

Some New Twists on Forfeiture Reallocation Litigation: Podcast

Yet another 401k forfeiture fiduciary breach suit has been filed, but there are some key differences. And then there is a case that has been through several rounds of adjudication and though winning, has had to keep going back to court. In this podcast, Nevin Adams and Fred Reish examine the issues and potential implications, as well as a quick review of some recent updates.

Source: Napa-net.org, February 2025

401k Excessive Fee Class Action Lawsuits Proliferate in 2024

In 2024, excessive fee class action litigation under ERISA has increased by 35%, continuing a trend seen in other ERISA class action cases. The rise has been notable in the past six months, influenced by record-high settlements for plaintiffs over the previous three years. While some major cases have settled, plaintiff law firms are employing innovative legal strategies to initiate new lawsuits, including an uptick in forfeiture claims against defined contribution plans, excessive fee cases, and fraud claims under the Affordable Care Act. Additionally, the year has seen more claims against defined benefit plans, particularly around pension risk transfers, and an increase in fiduciary breach claims against health plans, including those related to tobacco and vaccine wellness programs.

Source: Hallbenefitslaw.com, February 2025

Supreme Court Declines to Address Circuit Split Over Arbitration Provisions in ERISA-Covered Plans

The U.S. Supreme Court has denied Tenneco's request to enforce an arbitration clause in its ERISA-governed retirement plan, leaving an ongoing circuit court split unresolved regarding the enforceability of such provisions. Tenneco and its subsidiary, Driv Automotive, faced a lawsuit from current and former employees who accused the company of mismanaging the retirement plan and violating fiduciary duties under ERISA. The employees alleged that the company's selection of poorly performing investment options resulted in significant financial losses in their retirement savings.

Source: Hallbenefitslaw.com, February 2025

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

Litigation attorneys Monica Perkowski, Kayla Pragid, Lindsey Camp, and Todd Wozniak co-authored this article in the Employee Benefit Plan Review discussing the rise of ERISA class actions challenging the use of 401k plan forfeitures. Plaintiffs argue that offsetting future employer contributions with these forfeitures may violate fiduciary duties under ERISA. Although longstanding regulatory guidance permits this practice, the lawsuits present a new liability theory. The authors suggest that plan sponsors should reevaluate their forfeiture terms to ensure compliance and reduce litigation risks.

Source: Hklaw.com, February 2025

Federal Judge Reaffirms Biden Era ESG Rule

A federal judge in Amarillo, Texas, has once again dismissed the arguments from 26 Republican-led state attorneys general questioning the validity of the Biden Administration’s ESG rule. This coalition had requested the court to rethink its previous decision upholding the rule following the U.S. Supreme Court's overturning of the Chevron doctrine in June. The Labor Department's rule permits sustainable investment options in 401k plans, using ESG factors as a "tiebreaker" when other investment considerations are equal.

Source: Napa-net.org, February 2025

Judge Denies Request to Block DOGE From Accessing DOL Data

A federal judge has ruled that the plaintiffs, including the AFL-CIO, challenging the Department of Government Efficiency's access to data at the DOL do not have standing to sue. This decision allows DOGE to continue its operations for now. The plaintiffs had filed a complaint seeking to block the DOL from sharing sensitive information with DOGE, claiming violations of the Privacy Act and potential harm to employees. Judge John D. Bates acknowledged concerns about the defendants' conduct but ultimately dismissed the case due to a lack of alleged injury by the plaintiffs.

Source: Napa-net.org, February 2025

Schlichter Targets Massive 401k Plan With Forfeiture Suit

A new fiduciary breach lawsuit has been filed against Charter Communications, Inc. regarding its 401k Savings Plan. The law firm Schlichter Bogard, LLC is representing participant-plaintiffs Patrick O’Donnell, Wayne Saffold, and Mark Papenfuss, who claim to represent a class of participants and beneficiaries. As of December 31, 2023, the plan had over 102,000 active participants and nearly $7.87 billion in total assets. The case, titled O'Donnell et al. v. Charter Communications Inc., is similar to numerous previous lawsuits on the same issue, but it includes unique elements or claims.

Source: Napa-net.org, February 2025

Northern District of California Dismisses 401k Forfeiture Suit

In Hutchins v. HP Inc., the U.S. District Court for the Northern District of California dismissed the plaintiff's claims regarding the use of forfeited employer 401k contributions, ruling with prejudice. This case is part of a growing trend of class action lawsuits questioning whether using 401k forfeitures to offset future employer contributions violates ERISA. The court's decision underscores the need for carefully drafted plan provisions that specify the allowed uses of forfeitures and reinforces the importance for employers and plan fiduciaries to regularly review their plan documents to ensure compliance with legal standards.

Source: Hklaw.com, February 2025

Amazon Faces Class Action Lawsuit for Mismanagement of $350M in Forfeited 401k Plan Contributions

Amazon is facing a class action lawsuit from its retirement plan participants regarding the handling of forfeited 401k contributions. The plaintiffs claim that Amazon misused these forfeited funds to offset the company's contributions instead of using them to benefit participants by lowering plan fees. This lawsuit alleges a violation of fiduciary duty under ERISA. Similar actions have been taken against other companies like Bank of America and Wells Fargo for comparable issues.

Source: Hallbenefitslaw.com, February 2025

Presumed Guilty? The Cornell Decision Could Help Rein in Questionable ERISA Litigation

The U.S. Supreme Court recently heard a case involving Cunningham v. Cornell University, which addresses when a plan service agreement can be challenged. The decision could significantly influence ERISA litigation and attempts to curb speculative lawsuits. Fundamental legal concepts like standing -- requiring plaintiffs to demonstrate actual harm -0- and the need for reasonable suspicion of wrongdoing are essential to prevent frivolous lawsuits from overwhelming the courts.

Source: Cohenbuckmann.com, February 2025

Allstate's 401k Turns Back Focus Fund Fiduciary Suit

The fiduciaries of the Allstate 401k plan have successfully defended against a lawsuit alleging a breach of fiduciary duty regarding their selection of target date funds and advisory services. The lawsuit, originally filed by plaintiff Cutrone with the help of Scott+Scott Attorneys and Michael M. Mulder, argued that the plan's fiduciaries failed to effectively leverage their large plan size to choose appropriate target date options, specifically criticizing the selection of Northern Trust Focus Funds, which the plaintiff claims have significantly underperformed compared to benchmarks and similar funds since their launch in 2010.

Source: Asppa-net.org, February 2025

How ERISA Litigators Strengthen Plan Compliance and Risk Management: Video

In a one-on-one interview, Epstein Becker Green attorney Jeb Gerth discusses the importance of strategic ERISA plan design and administration, emphasizing that compliance alone is insufficient. He highlights how incorporating a litigation perspective can serve as a "stress test" to reveal potential legal vulnerabilities, such as discretionary decision-making and insufficient documentation. By proactively addressing these issues, plan administrators can reduce the risk of legal disputes and enhance the integrity of ERISA plans.

Source: Workforcebulletin.com, February 2025

Court's ESG Ruling Puts Pressure on Managers of 401k Plans

A recent ruling court found that American Airlines violated its fiduciary duty by allowing BlackRock, its 401k manager, to consider ESG factors in proxy voting for employees. O'Connor criticized BlackRock for its significant influence over the industry, claiming that ESG investments often underperform traditional ones. Although BlackRock is not a defendant in the case, the ruling could lead to similar lawsuits in the future, according to legal experts, as the judge seeks further information before determining damages. This decision may reshape the approach to ESG investing within retirement plans.

Source: Wagnerlawgroup.com, February 2025

ESG Court Ruling Could Prompt 401k Upheaval

A recent ruling by U.S. District Judge Reed O'Connor found that American Airlines violated its fiduciary duty by allowing its 401k manager, BlackRock, to consider environmental, social, and governance factors in investment decisions. This decision could potentially lead to "copycat" lawsuits in the 401k plan industry, prompting significant changes in how such plans are managed. Bloomberg reported that the case may influence the future approach to ESG investing in retirement plans.

Source: Wagnerlawgroup.com, February 2025

Trader Joe's 401k Plan Accused of Overinvesting in Balanced Fund

Six former Trader Joe's employees have filed a lawsuit against the grocery chain, its board of directors, and its investment committee, alleging mismanagement of the company's 401k plan. The lawsuit, filed in the U.S. District Court for the District of Massachusetts, claims that approximately 70% of the plan's assets -- nearly $2 billion -- were overconcentrated in the American Funds American Balanced Fund R4 in 2019 and 2020. The suit argues that the company continued to use the higher-fee R4 share class despite the availability of a more suitable version through a collective investment trust beginning in 2021.

Source: Planadviser.com, February 2025

The Year in ERISA Litigation: 2024 Trends and What We're Watching in 2025

ERISA litigation has significantly increased in recent years, with 2024 seeing a notable rise in lawsuits related to defined contribution and defined benefit plans, as well as health plan fiduciary breaches. The trend indicates that 2025 will likely be even busier. The document provides a comprehensive seven-page analysis of the 2024 litigation landscape and offers insights into expected developments in 2025.

Source: Willkie.com, February 2025

Virginia District Court Dismisses Suit Challenging Use of Managed Account as a Default Investment

On January 10, 2025, the U.S. District Court for the Eastern District of Virginia dismissed the claim in Hanigan v. Bechtel, where the plaintiff argued that the plan sponsor violated ERISA's fiduciary prudence standard by using a managed account as the plan's qualified default investment alternative. The plaintiff contended that for 65% of participants who did not provide personalized information, the managed account's approach was similar to that of a target-date fund but incurred higher fees ($458 more annually) and yielded poorer returns. The dismissal of the case raises important implications for the fiduciary responsibilities of plan sponsors.

Source: Octoberthree.com, February 2025

Southwest 401k Hit With Lawsuit for Underperforming Fund

A class action lawsuit was filed on Tuesday in the U.S. District Court for the Northern District of Texas by Sanford Heisler Sharp McKnight against Southwest Airlines Co., accusing the airline of breaching fiduciary duties under ERISA by mismanaging its Retirement Savings Plan. The complaint, representing over 60,000 plan beneficiaries, alleges that Southwest failed to remove the Harbor Capital Appreciation Fund, which holds over $2 billion in assets but has underperformed its benchmarks and similar funds for more than 15 years. The Harbor Capital Fund was selected as an investment option before 2010, and by December 2018, its performance lagged behind the Russell 1000 Growth Index and other alternatives, yet Southwest did not take action to replace it.

Source: 401kspecialistmag.com, February 2025

Practical Takeaways From Spence v. American Airlines for ERISA Plan Fiduciaries

On January 10, 2025, Judge Reed O'Connor of the Northern District of Texas made a significant ruling in Spence v. American Airlines, Inc., addressing the duties of retirement plan fiduciaries under ERISA concerning ESG issues. The judge found that American Airlines and its Employee Benefits Committee breached their duty of loyalty by including funds in their 401k plan that were managed by an investment manager known to engage with companies on ESG-related issues, even though the funds themselves were not ESG-focused. However, he ruled that there was no breach of the duty of prudence, as the defendants' monitoring practices were consistent with standards among large plan fiduciaries.

Source: Ropesgray.com, January 2025

Latest Forfeiture Reallocation Suit Targets JP Morgan

Another national employer's 401k plan has been sued for a fiduciary breach concerning the misuse of employee retirement plan assets. The lawsuit, filed by participant-plaintiff Daniel J. Wright, alleges that JPMorgan Chase & Co. and JPMorgan Chase Bank improperly used forfeited plan assets to meet their employer contribution obligations instead of benefiting the plan participants, violating ERISA and their fiduciary duties.

Source: Asppa-net.org, January 2025

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

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