Wave of ERISA Class Actions Challenges 401(k) Plan Practices
From the Desk of Jim Eccleston at ÍøÆسԹÏ
A surge in class action lawsuits under the Employee Retirement Income Security Act (ERISA) is forcing employers to reevaluate how they manage workplace retirement plans. According to a new report from law firm Duane Morris, settlement amounts in these cases have skyrocketed in recent years, drawing more seasoned plaintiffs' attorneys into the ERISA litigation space.
Federal courts have allowed these claims to proceed past motions to dismiss, signaling that they present plausible causes of action under ERISA.
Experts told Financial Planning that for plaintiffs’ counsel, achieving class certification in these cases represents a significant victory. Class certification typically drives companies to settle, often for large sums.
Meanwhile, FinancialPlanning reports that ERISA litigation is expanding in other areas. Earlier this month, the U.S. Supreme Court unanimously lowered the threshold for plaintiffs alleging prohibited transactions in retirement plans. The case involved Cornell University employees who claimed their retirement plans engaged in prohibited transactions by contracting with service providers charging excessive fees. The decision forces defendants to provide clear evidence of any applicable statutory exceptions early in the litigation, a shift that will likely encourage more filings.
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