Washington, DCOn September 2, 1974, the Employee Retirement Income Security Act (ERISA) came into being. The point of ERISA benefits law was to ensure worker’s pensions were protected. ERISA has now turned 40, and employees who feel their ERISA rights and protections have been violated can file an ERISA lawsuit to protect their rights.
In the past 40 years, lawsuits concerning ERISA have been filed by employees and plan beneficiaries, alleging their employers and/or plan fiduciaries have violated ERISA laws. Meanwhile, recent changes to ERISA laws have strengthened the requirements for people who act as plan fiduciaries. As more ERISA lawsuits are filed, more sections of the act are being interpreted and reinterpreted.
Despite laws protecting ERISA plan assets, participants and beneficiaries still see situations in which fiduciaries either misunderstand the law or fail in their duties. In some cases, these failures can result in the value of a plan’s assets dropping by millions of dollars. In other cases, participants and beneficiaries argue that excessive fees or failure to properly invest the assets have negatively affected the pension and/or benefits plans.
One such lawsuit was recently revived by a US appeals court. That lawsuit (In re Lehman ERISA Litigation, 2nd US Circuit Court of Appeals, No. 11-4232) was filed by participants in a Lehman Brothers retirement plan. According to Reuters, the plaintiffs alleged plan officials breached their fiduciary duties by investing the plan in Lehman Brothers stock, despite the bank’s declining financial health.
The lawsuit was dismissed in 2011, based on a presumption of prudence when corporate officials allow retirement plans in company stock. A more recent case, however, resulted in a decision from the Supreme Court that the presumption of prudence is not extended to retirement plan investment lawsuits.
Among areas of ERISA litigation that remain highly contested are the fees charged to a plan - higher fees can substantially affect the value of a plan - with plaintiffs alleging fiduciaries have a duty to obtain lower fees.
An ERISA excessive fees lawsuit was filed against Fidelity, alleging Fidelity violated its ERISA responsibilities by allowing excessive fees to be charged to its plan. The lawsuit (Yeaw vs. FMR LLC, case number 14-10035) alleges the plan record-keeper received around $335 per plan participant per year when the plan could have been maintained for $10 per participant per year.
Although the focus of ERISA litigation may have changed in 40 years, employees are still able to file lawsuits to protect their rights and ensure their employers or their plan fiduciaries follow ERISA laws.
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