The last two years have broken records for fiduciary litigation against retirement plan sponsors. Since 2020, there have been more than 200 new class action lawsuits brought under the Employee Retirement and Income Security Act (ERISA) and more than 100 new cases alleging breaches of fiduciary duties in connection with fees charged to plan participants.
These statistics were shared by Kevin Mahoney, managing director at financial services firm Raymond James & Associates in West Nyack, N.Y., and Kristen Koluch, senior vice president for investments at the firm. They spoke on March 28 at the Society for Human Resource Management's Employment Law & Compliance Conference in Washington, D.C.
"There were five times as many lawsuits against defined contribution plans in 2020 versus 2019, and litigation brought in 2021 surpassed that and is on pace to do so again this year," Mahoney said.
Increasingly, he noted, smaller plans with just $1 million or $2 million in assets are being sued, as "small plans are held to the same standards as big corporations."
How risky are fiduciary missteps? According to law firm Seyfarth Shaw's annual report on workplace class-action settlements, last year the top 10 ERISA settlements totaled $837 million, more than double the 2020 total of $380 million, largely as a result of class action filings challenging defined contribution plan fees and alleging that plans offered poorly performing investment funds.
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