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The Tide May Be Turning on Flood of ERISA Excessive Fee Class Actions

"[Recent] Seventh and Sixth Circuit decisions collectively call for pleadings by plaintiffs that show the specifics of how a bad process was involved in fiduciary choices about vendors or investment vehicle offerings ... That may be welcome news to plan fiduciaries at a time when plaintiffs' attorneys are inundating employers with lawsuits alleging excessive fees and poorly performing investments in defined contribution plans based only on market comparators."

Sixth Circuit Provides Tutorial on Context-Specific Pleading in ERISA Fee-and-Expense Cases After Northwestern v. Hughes

"These decisions effectively rebut the arguments of fiduciary imprudence asserted in most excessive fee lawsuits, where plaintiffs ask the court to infer fiduciary malpractice based on circumstantial evidence of what participants consider an undesirable outcome. In so doing, the Sixth Circuit's analysis is instructive on Hughes."

Supreme Court Holds ERISA Requires Plaintiffs to Allege Context-Specific Breaches of Fiduciary Duty to Monitor Investments

"By emphasizing that at the pleading stage this standard applies with full force to plaintiffs in ERISA excessive fee cases, and underscoring that the viability of such a claim depends on a fact specific inquiry, the Supreme Court's unanimous opinion suggests cookie cutter allegations of fiduciary breach drawn from other cases may not suffice. Rather, going forward, courts may require plaintiffs to plead facts showing that the specific decisions fiduciaries have made, under the then-existing circumstances, plausibly amount to a violation of ERISA's fiduciary standard of care." [Hughes v. Northwestern Univ., No. 19-1401 (S. Ct. Jan. 24, 2022)]

Process Prevails in ERISA Excessive Fee Victories

"California and North Carolina district courts have dismissed major class action challenges to AT&T and Lowe's 401(k) plan recordkeeping fees based on extensive step-by-step documentation that the plan fiduciaries acted prudently in monitoring the plan's recordkeeping expenses. These cases provide a useful guide for the type of evidence needed in ERISA breach of fiduciary claims and likely variants." [Alas v. AT&T Services, Inc., No. 17-8106 (C.D. Cal. Sep. 28, 2021); Reetz v. Lowe's Companies, Inc.; Administrative Committee of Lowe's Companies, Inc. and Aon Hewitt Investment Consulting, Inc., No. 18-075 (W.D.N.C. Oct. 12, 2021)]

PEPs and MEPs: Compliance and Fiduciary Considerations Under the SECURE Act (PDF)

"Participating employers retain a fiduciary obligation and liability for making sure that the sponsor of the group or association MEP, PEO MEP or PEP has been prudently selected and is operating the plan in a prudent manner and in the best interests of plan participants.... [S]ponsors and participating employers should have in place robust governance practices and comprehensive operational compliance procedures that provide evidence of a thorough investigation and an independent validation of procedural and substantive process standards that demonstrate that the plan fiduciaries and participating employers have acted in a prudent manner."

$59 Million Settlement in Pension Plan Actuarial Assumption Litigation

"According to the Court, the average benefit increase under the settlement is $21.40 each month, and the present value of the average class member's net benefit under the settlement is $4,737. Based on the Plans' records, there are over 10,000 class members." [Cruz v. Raytheon Co., No. 19-11425 (D. Mass. settlement agreement filed Feb. 12, 2021; approved Feb. 23, 2021)]

Multiemployer Plans Poised for More Actuarial Assumption Lawsuits

"[As] multiemployer plans become less well funded, plan trustees have been using more conservative assumptions based on [PBGC] termination liability in order to increase the employer's liability in withdrawing from the plan. This has led to litigation quarreling over whether actuaries may have best estimates that differ for withdrawal liability and funding purposes. There has been a flurry of decisions on this subject in recent months with different courts split on whether using different assumptions for different purposes can be attacked as presumptively unreasonable both in arbitration and on judicial review."

Coping with the Increase in 401(k) Cyberattacks and Fraudulent Plan Distributions (PDF)

"The heightened level of plan distributions coupled with the security risks associated with electronic communications and the 'new normal' of working remotely, sometimes on personal computers, may increase the exposure of participants' confidential and personal data to cybercriminals.... Monitoring of the cybersecurity controls of third-party service providers, particularly the plan administrator, should occur on a regular basis and should be documented and involve experts if necessary."

New Year's Resolution: Prepare Yourself for an IRS or DOL Plan Audit

"How confident are you that your company's retirement plans are being run in accordance with all legal requirements under [ERISA] and the Internal Revenue Code? ... This Alert addresses what questions you should be asking when attempting to potentially minimize monetary sanctions, serious consequences to your employees, and personal liability for company officials who are ERISA-plan fiduciaries responsible for the investment of plan assets and plan administration that can stem from an IRS or DOL Plan audit."

New York Appellate Court Issues Decision on Executive Compensation Order and Regs

"[T]he four-Justice majority concluded that 'limit on administrative costs and executive compensation paid for by state funds and state-authorized payments, [does not] violate the separation of powers doctrine.' In contrast, the Court said that DOH exceeded its authority by imposing the soft cap and restricting executive compensation paid from non-state dollars.... As a result, there is now a conflict between the Appellate Division's Third Department and Second Department, which previously upheld Governor Cuomo's Executive Order and DOH's implementing regulations." [LeadingAge New York, Inc. v. Shah No. 523308 (N.Y. App. Div. June 22, 2017)]