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Pension Predators or Legitimate Oversight? The ERISA Litigation Crisis Is Threatening Your Retirement Plan

The retirement plan industry faces lawsuits compelling sponsors to choose costly settlements or litigation, and American workers bear the cost.
The retirement plan industry faces lawsuits compelling sponsors to choose costly settlements or litigation, and American workers bear the cost.

The retirement plan industry is under siege. A wave of class-action lawsuits is forcing plan sponsors to choose between costly settlements and even costlier litigation—and American workers are paying the price. 

This week, the House Education and Workforce Subcommittee held a pivotal hearing titled "Pension Predators: Stopping Class Action Abuse Against Workers' Retirement." The American Retirement Association (ARA) delivered a stark warning: without legislative reform, retirement security for millions of Americans hangs in the balance. 


With the retirement plan industry under an heavy cloud of litigitation, ARA is calling on Congress to take action.
With the retirement plan industry under an heavy cloud of litigitation, ARA is calling on Congress to take action.

The Numbers Tell a Troubling Story 

Data from the Center for Retirement Research at Boston College and former writings by current Labor Assistant Secretary Daniel Aronowitz paint a concerning picture: 

  • 428 lawsuits were filed between 2006 and 2017 

  • One-third of large plans have been sued since 2016 

  • Over half of the plans with more than $1 billion in assets have faced litigation 

  • 42 settlements in 2023 alone totaled more than $353 million 

These aren't just statistics; they represent resources that could have enhanced retirement outcomes for American workers. 

The Cunningham Decision: A Game-Changer 

The U.S. Supreme Court's recent decision in Cunningham v. Cornell University has accelerated the litigation trajectory. By lowering pleading standards for prohibited transaction claims, plaintiffs can now challenge routine retirement plan service transactions without addressing whether common statutory exemptions apply. 

The result? "Cookie-cutter" lawsuits that follow a predictable pattern—alleging excessive fees, imprudent investment selections, or underperformance relative to cherry-picked benchmarks. Plaintiffs can now litigate first and investigate later, shifting the entire burden to fiduciaries. 

The Hidden Costs 

Beyond the headline settlement amounts, litigation creates high hidden costs: 

  • Legal defense expenses and document production 

  • Internal compliance reviews and audits 

  • Hesitancy by employers to establish or improve retirement offerings 

  • Chilling effect on plan innovation as sponsors become risk-averse 

Legislative Reform on the Horizon 

The ERISA Litigation Reform Act (H.R. 6084), introduced by Rep. Randy Fine (R-Fla.), aims to restore balance. The ARA's recommendations include: 

  1. Revised Pleading Standards: Require plaintiffs to address statutory exemptions in complaints before proceeding 

  2. Discovery Reform: Restrict premature discovery until courts resolve threshold legal issues, preventing plaintiffs from using discovery costs as settlement leverage 

What This Means for Plan Sponsors 

For self-funded health plans and retirement plan fiduciaries, the stakes couldn't be higher. Without reform, expect continued litigation pressure that diverts resources from participant benefits and discourages plan innovation. 

Understanding your fiduciary duties under ERISA, including loyalty, prudence, and monitoring, is more critical than ever. Fiduciaries face personal liability for breaches, which may put their homes, retirement savings, and careers at risk. 

The good news? Congressional attention to this issue signals potential relief. Plan sponsors should remain engaged with industry associations and closely monitor legislative developments. 

Proactive Protection: Building a Defensible Position 

While legislative reform moves through Congress, plan sponsors can take immediate steps to strengthen their fiduciary position. Independent payment integrity oversight creates a documented audit trail that demonstrates prudent plan governance—exactly the kind of evidence that can defend against "cookie-cutter" litigation claims. 

Key defensive measures include: 

  • Regular, independent claim review to identify errors and overpayments 

  • Documentation of fee reasonableness reviews 

  • Ongoing monitoring of TPA, network, and vendor performance 

  • Conflict-free verification to ensure no vendor influence in oversight 

The Bottom Line 

ERISA was designed to protect workers, not enrich litigation firms. As Congress weighs reform, the retirement industry has an opportunity to advocate for meaningful change that preserves legitimate oversight while eliminating abusive practices that ultimately harm the very participants these laws were meant to protect. 

Act Now 

Want to ensure your plan is positioned for compliance and defensibility? Contact ClaimInformatics to learn how independent claims review and fiduciary oversight can strengthen your plan's governance framework. 

Sources & References 

Related Resources from Claim Informatics 


 
 
 

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