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COLLECTED WISDOM™ on Court and Legal Actions Related to Retirement PlansA directory and index of articles that review what is happening in the courts and legal system.
Swiss Re Group, Empower Targeted in Sweeping Fiduciary Breach SuitA 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 CloroxThe 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 PlanIn 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 CasesThis 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-SellingFormer 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: PodcastYet 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 2024In 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 PlansThe 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 SuitsLitigation 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 RuleA 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 DataA 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 SuitA 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 SuitIn 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 ContributionsAmazon 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 LitigationThe 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 SuitThe 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: VideoIn 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 PlansA 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 UpheavalA 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 FundSix 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 2025ERISA 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 InvestmentOn 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 FundA 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 FiduciariesOn 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 MorganAnother 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?: PodcastA 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 ContractPractitioners 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 FiduciariesOn 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 AttorneyThe 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 SuitsRecently, 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 LandscapeIn 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 SCOTUSThe 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 PlanLast 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: OpinionThe 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 CasesThis 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 2024In 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 LitigationPlaintiffs 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 LandscapeUnder 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 RulesA 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 $2.25MKimberly-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 LawsuitsThe 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 SuitA 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 SuitThe 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 CourtAmazon.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 SuitSince 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 SponsorsThis 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 LitigationIn 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 DismissedA 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" ActivitiesRep. 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 CrisisThe 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 SettlementUnitedHealth 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 SuitThis 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 ManagementThe 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 LawsuitKimberly-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 BiasIn 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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