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 one or more poorly-performing investment options in the plan. Recent cases in this category include the following:
In this connection, on August 23, 2021 the U.S. Chamber of Commerce filed a brief in the case of In re American National Red Cross ERISA Litigation. The brief stated that “This case is one of many in a recent surge of class actions challenging the management of employer-sponsored retirement plans…converting subpar allegations into settlements has proven a lucrative endeavor— mostly for the lawyers bringing these lawsuits, though, rather than the plan participants they purport to represent.” It remains to be seen how persuasive that brief will be in this case and potentially in other cases of this ilk, and how long this litigation wave will last.
Other types of recent ERISA cases are as follows:
Jackson v. AT&T Retirement Savings Plan (decided on August 16, 2021 by the U.S. Court of Appeals for the Fifth Circuit): This case resulted from Cingular Wireless being merged into AT&T Mobility. After the merger, Cingular’s 401(k) plan was terminated, and participants’ accounts were transferred to the plan involved in this case. The plaintiff, who was a participant in the Cingular plan, alleged that the plan termination and asset transfer resulted in a decrease of company contributions to the plan. The plaintiff argued that constituted a fiduciary breach under ERISA.
The appeals court stated that the defendant was acting as an employer/settlor of the plan’s trust, not in a fiduciary capacity, when it took the actions about which the plaintiff complained. Also, the plaintiff failed to allege facts to show that any other actions were taken in violation of the terminated plan’s or the surviving plan’s terms. The court then cited well-settled precedent, under which “an employer that decides to terminate, amend, or renegotiate a plan does not act as a fiduciary, and thus cannot violate its fiduciary duty, provided that the benefits reduced or eliminated are not accrued or vested at the time, and that the amendment does not otherwise violate ERISA or the express terms of the plan.” Thus, the appeals court affirmed the lower court’s dismissal of the case.
Morris v. Aetna Life Insurance Company (decided on August 9, 2021 by the U.S. District Court for the Central District of California): The plaintiff was a participant in her employer’s long-term disability plan, which the defendant administered. After the defendant miscalculated the plaintiff’s benefit under the plan and paid too much to her, the defendant discovered its error and began reducing her monthly benefits to recoup the overpayment. The plaintiff then filed this lawsuit. The court first ruled that because the plan’s terms were unambiguous regarding the benefit formula, the plaintiff is not entitled to the overpayment she received.
Second, the court addressed her claim that the defendant breached its fiduciary duty to her by miscalculating her plan benefits. The court noted that the threshold question in an ERISA fiduciary breach case is not whether the defendant’s actions adversely affected a participant’s interest, but whether the defendant was performing a fiduciary function when taking the action about which the plaintiff complains. Here, the court cited precedent concluding that “the calculation of benefits according to a pre-set formula [is] not a fiduciary function under ERISA.” That is because discretion is one of the central requirements regarding a fiduciary role, and calculating a benefit within a preset framework “does not involve the requisite discretion or control to constitute a fiduciary function.” Such calculation involves only a ministerial function. Therefore, in dismissing the case, the court opined that the defendant was not performing a fiduciary function when it miscalculated the plaintiff’s benefits.