April 2024 ERISA Litigation Update: 

Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. A sample of recent cases is provided below. 

The most common type of ERISA case for approximately the past 18 years involves retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included one or more poorly-performing investment options in the plan. Recent cases in this category include the following:

  • Sellers v. Trustees of Boston College (procedural ruling issued on April 11 by the U.S. District Court for the District of Massachusetts)
  • Mills v. Molina HealthCare, Inc. (dismissed on March 20 by the U.S. District Court for the Central District of California)  
  • Snyder v. UnitedHealth Group (procedural ruling issued on March 12 by the U.S. District Court for the District of Minnesota)
  • Rodriguez v. Hy-Vee, Inc. (dismissed on March 7 by the U.S. District Court for the Southern District of Iowa)

Other types of recent ERISA cases are as follows:

Su v. Trees R Us Inc. (complaint filed on April 2 in the U.S. District Court for the Eastern District of New York):  The U.S. Department of Labor (the “DOL”) alleges that the defendants, who own a company that sponsors a profit sharing plan, took more than $149,000 from the plan and transferred that amount to the company’s bank account. The DOL also alleges that the defendants “then used this money for Company and personal expenses, including mortgage payments and college tuition.” Finally, the DOL contends that the defendants have failed to file Form 5500 for the plan since 2016.   

The DOL seeks a court order directing the defendants:

  • To restore all losses, plus interest, incurred by the plan as a result of their ERISA violations;
  • To offer money in their own plan accounts to satisfy the defendants’ obligation to restore the misappropriated funds;
  • To promptly file Forms 5500 for the plan; and
  • To appoint an independent fiduciary to administer the plan, at the defendants’ expense.   

Great Lakes Management Company v. USI Consulting Group, Inc. (complaint filed on March 28 in the U.S. District Court for the District of Minnesota):  The plaintiff is the plan sponsor of a 401(k) plan for which the defendant provided consulting services, including fiduciary investment advice and 401(k) plan design advice. The plaintiff asserts that the defendant negligently advised the plaintiff regarding the plan, “which caused the Plan to improperly and unnecessarily contribute $98,605 for the years 2022 and 2023.”

More specifically, the plaintiff contends that it agreed to amend the plan based on the defendant’s advice. The amendment modified the plan mainly by creating safe harbor contributions that included “true up” contributions. The plaintiff goes on to state, however, that the defendant failed to advise it of the “true up” cost implications. After adopting the amendment, the plaintiff allegedly learned for the first time that the “true up” portion of the amendment obligated the plaintiff to “unnecessarily contribute to an employee’s 401(k) contribution for the entire year regardless of how long that employee had been employed or enrolled in the Plan.”

Given the plaintiff’s assertion that the defendant breached its ERISA duties and rendered negligent advice by failing to adequately advise the plaintiff that the amendment would require the plaintiff to contribute $98,605 more than it otherwise would have been required to contribute absent the amendment, the plaintiff seeks a court order:

  • Requiring the defendant to disgorge the fees plaintiff paid with respect to the allegedly negligent advice; and
  • Awarding to the plaintiff its costs and disbursements.

Guenther v. BP Retirement Accumulation Plan (decided on March 28 by the U.S. District Court for the Southern District of Texas):  This case involved the defendant plan sponsor’s conversion of its traditional defined benefit plan to a cash balance retirement plan, and “the sufficiency of the explanation of the conversion of a defined benefit pension plan from a final average pay formula to a cash balance formula.” The court has ruled as follows:

  • The cash balance plan shifted the risk of a drop in interest rates and other investment risks from the defendant to its employees. In this connection, the defendant’s communication campaign violated its ERISA fiduciary duty to discharge its duties solely in the interest of participants and their beneficiaries for the exclusive purpose of providing benefits to participants by: (1) promoting only the positive aspects of the plan change to employees, for the purpose of retaining the employees; (2) making promises to employees about comparative plan performance, without warning them about circumstances that would cause the promises to fail; (3) failing to share with employees that the defendant realized benefits from the conversion other than immediate cost savings; and (4) failing to share with employees that the converted plan introduced risk to the employees they had not previously borne.
  • The defendant planned for participants to rely on its communications regarding the conversion, including the comparisons it made to the benefits provided under the prior plan formula, to their detriment and to the defendant’s advantage.

The court concluded its opinion by noting that the plaintiffs are entitled to equitable relief under ERISA, and the parties must file supplemental briefs for the court’s consideration regarding the appropriate form of that equitable relief.