ERISA Class Action Review – 2025

ERISA Class Actions I. Executive Summary

The surge of class action litigation filed under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq ., over the last decade persisted in 2024. Class action litigators in the plaintiffs’ bar continuing to focus on challenges to ERISA fiduciaries’ management of 401(k) and other retirement plans. As in recent years, the lion’s share of these cases alleged that ERISA fiduciaries breached their duties of prudence and loyalty by, among other things, offering expensive or underperforming investment options and charging participants excessive recordkeeping and administrative fees. Hundreds of “fee and expense” class actions have been filed since 2020, driven by ERISA plaintiffs’ class action law firms alongside some new entrants to the space. Class certification remains challenging to defeat outright in these and other ERISA cases given the nature of the claims. Because plaintiffs in ERISA cases frequently allege that defendants violated the law through actions that impacted large numbers of plan participants in similar ways, class certification is frequently easy to achieve for the plaintiffs. Indeed, courts often reject challenges to standing and compliance with the requirements of Rules 23(a) and (b), concluding that factual differences in the type of benefits or investments at issue are merits or damages issues less relevant to class certification than to allegations that the defendants’ conduct produced similar, broad-based injuries. Understandably, defendants pour significant resources into attacking these cases in their infancy. Both sides know that early dismissal may be the defendants’ best hope of avoiding the burden and expense of the protracted discovery that will come before and after class certification, which is often viewed as a foregone conclusion in ERISA litigation. In fact, this dynamic is central the strategy of the plaintiffs’ bar in many of these cases. If the plaintiffs can overcome initial challenges, they can then leverage the prospect of substantial defense costs to obtain an early seven-figure settlement that still costs less than defending the case through summary judgment and trial. To defeat these claims, many defendants argue that putative class action complaints fail to state plausible claims under Rule 12(b)(6). Specifically, defendants often contend that plaintiffs simply label any plan ’ s failure to select cheaper or better performing investment options as a purported breach of fiduciary duty, but do so without alleging anything to support a plausible inference that the fiduciaries’ decision-making process was flawed. For their part, the plaintiffs’ bar argues that their lack of access to confidential information about the relevant fiduciary processes unfairly handicaps their ability to offer the more detailed allegations that the defendants demand. Historically, the results of these disputes have been mixed, and they were in 2024 as well. This past year courts also issued conflicting decisions on the enforceability of mandatory arbitration and class action waiver provisions with respect to ERISA claims. On the whole, these decisions were heavily slanted toward denying motions to compel arbitration and not enforcing class action waiver provisions despite the spate of recent U.S. Supreme Court decisions upholding the enforceability of such provisions in employment and other contexts. There were several important developments in the ERISA class action space last year. For example, 2024 witnessed the emergence of a novel variety of claims. These claims center on allegations that fiduciaries have misused employer contributions to 401(k) plans that were forfeited by former employees. Plaintiffs have argued that forfeited funds should be used to reduce workers’ administrative expenses rather than benefiting plan sponsors. Likewise, 2024 witnessed the first shots in what may be a coming battle over the propriety of environmentally and socially conscious investments by ERISA fiduciaries. ERISA class action litigation remains an active area with significant financial upside for the plaintiffs’ bar and high defense and settlement costs for defendants. Based on developments in 2024, it is likely to remain so.

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