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 fifteen years has involved retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included poorly-performing investment options in the plan. Recent cases in this category include the following:
Other types of recent ERISA cases are as follows:
Markham v. The Variable Annuity Life Insurance Company (complaint filed on January 4, 2021 in the U.S. District Court for the Eastern District of California): The named plaintiff in this case is a 401(k) plan sponsor that was a client of the defendant, which provided plan administration and investment products to the plaintiff. After the plaintiff became dissatisfied with the defendant’s services, he informed the defendant that he intended to terminate the plan’s contract and to select a successor plan service provider. The defendant then imposed its contract’s surrender/withdrawal charge.
The plaintiff argues that such charge was not adequately disclosed to him and that the charge violated ERISA’s regulations governing the necessary services prohibited transaction exemption. (Under one part of those regulations, a 401(k) plan’s contract for services must be reasonable, and a contract is not reasonable unless it allows the plan to terminate the contract without penalty.) The plaintiff seeks recoupment of “an amount equal to all fees paid by the Class Members’ plans to VALIC (including its affiliates) in connection with the arrangement during the applicable statute of limitations,” as well as attorneys’ fees and litigation costs.
U.S. v. Abell (decided on January 15, 2021 by the U.S. Court of Appeals for the First Circuit): During 2020, the trial court granted the government’s request to garnish the plaintiff’s husband’s 401(k) account and to apply the proceeds to his nearly $4 million criminal restitution obligations. In this appeal, the plaintiff argued that the trial court erred in garnishing her husband’s account without allocating to her some of the funds, because she has a vested legal interest in the 401(k) account under state law and/or under the terms of the plan.
The appeals court first ruled that nothing in applicable state law indicates that both spouses have a vested property right in any retirement account that one spouse holds individually before the parties’ divorce. Next, the court concluded that although the plaintiff is her husband’s 401(k) plan beneficiary, that does not create for the plaintiff a vested interest in his plan account. That is because the plaintiff’s receipt of her husband’s death benefit is contingent on a number of circumstances (e.g., the parties not divorcing before the participant’s death). Therefore, the court rejected her challenge to the garnishment order.