June 2024 ERISA Litigation Update:

We have the rare situation where neither the Internal Revenue Service nor the Department of Labor issued any retirement plan guidance since the last edition of The Speed Reader was published. Thus, this month’s edition focuses solely on recent ERISA litigation.   

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:

  • Spence v. American Airlines, Inc. (procedural ruling issued on June 5 by the U.S. District Court for the Northern District of Texas)
  • Jones v. Memorial Hermann Health System (complaint filed on June 4 in the U.S. District Court for the Southern District of Texas)
  • Carfora v. Teachers Insurance Annuity Association of America (procedural ruling issued on May 31 by the U.S. District Court for the Southern District of New York)
  • Trauernicht v. Genworth Financial, Inc (procedural ruling issued on May 29 by the U.S. District Court for the Eastern District of Virginia)  
  • Hanigan v. Bechtel Global Corporation (complaint filed on May 24 in the U.S. District Court for the Eastern District of Virginia)
  • Moore v. Humana, Inc. (dismissed on May 23 by the U.S. District Court for the Western District of Kentucky)
  • Bracalente v. Cisco Systems, Inc. (dismissed on May 20 by the U.S. District Court for the Northern District of California)
  • Mator v. Wesco Distribution, Inc. (procedural ruling issued on May 16 by the U.S. Court of Appeals for the Third Circuit)

Another type of recent ERISA case is as follows:

Perez-Cruet v. Qualcomm, Inc. (order issued on May 24 by the U.S. District Court for the Southern District of California):  Previous editions of The Speed Reader have discussed a recent barrage of cases filed by a law firm in California, alleging that defendant plan fiduciaries violated ERISA by using plan forfeitures to help fund matching contributions instead of using forfeitures to pay plan expenses.

In this stage of one such case, the court considered the defendants’ motion to dismiss the case entirely. The court first noted that all the parties agree that the governing plan document allows forfeitures to be used to fund matching contributions or to pay plan expenses. The plaintiff contends, however, that the “overarching principles of ERISA and the Defendants’ fiduciary duties under ERISA leave only one choice [for the use of forfeitures]: defray the administrative costs of the Plan.”

The court then began its analysis by citing an ERISA provision, under which one of the duties of a plan fiduciary is to act solely in the interest of the participants and for the exclusive purpose of providing benefits to them. Applying that rule, the court declared that even though no court has ruled on this factual scenario:

  • “Dividing total administrative expenses among all participants suggests that a participant like plaintiff incurred an average administrative expense of $44 per year. Had Defendants used the $1,222,072 of forfeited nonvested contributions from 2021 toward paying Plan administrative expenses, all Plan participants would have benefited by incurring no administrative expense charge to their accounts. Instead, all Plan participants had to pay for administrative expenses that could have been reduced to zero had the Defendants chosen to use forfeited contributions in that way.”

In denying the defendants’ motion to dismiss the case, the court also stated that the plaintiff “plausibly claims that the Defendants breached their fiduciary duty to Plan participants by making a choice that put the employer’s interests above the interests of the Plan participants.” Thus, the case will proceed to trial.