Help your clients better understand evolving ERISA litigation risks

A growing diversity of ERISA class action lawsuits

In 2016, the vast majority of ERISA class action lawsuits were excessive fees cases. Excessive fees litigation peaked in 2020 at 117 cases but fell to less than half that number in 2023 and 2024, with 43 and 49 new cases respectively.

But this downward trend of one type of ERISA lawsuit should not be viewed as an overall reduction in ERISA class action risk. Over the last three-plus years, plaintiffs and their attorneys have pursued additional types of ERISA litigation with allegations related to:

• Plan Forfeiture—These suits allege that plans have violated fiduciary duties by using forfeited unvested funds to offset employer contributions rather than offsetting plan expenses, which were charged to plan participants. In 2024, 24 ERISA class action suits involving plan forfeiture disputes were filed—compared to zero suits prior to 2022.
• PBM Fees—In 2024, a record 12 ERISA class action suits were filed related to pharmacy benefit managers (PBMs). These suits generally allege that plans breached their fiduciary duty to participants by allowing PBMs to charge excessive fees for prescription medications.
• Pension Risk Transfer—These cases hinge on whether pension plans can legally transfer pension risk when they purchase annuity contracts from insurers. There have been inconsistent rulings in lower courts, which could help spur additional suits.

There has also been a relatively steady volume of ESOP-related class action lawsuits—averaging 65 new cases annually from 2016 through 2024—though new cases fell to a nine-year low in 2024 with 45 filings. We’ll cover ESOP litigation risks in more detail in a future article. (For an overview of ERISA and ESOP class action trends, see this Sompo infographic.)

Could we see a new wave of excessive fees cases?

Even though excessive fees cases have fallen from their 2020 high, an April 2025 US Supreme Court ruling may open the door for a new wave of this type of litigation.

The Court’s unanimous ruling in Cunningham v. Cornell University will make it easier for cases to move forward and will require plan fiduciaries to defend exemptions to prohibited transaction rules. The Court acknowledged concerns that the ruling could lead to an increase in meritless litigation and drive up costs for plan sponsors. Defending meritless cases of course still incurs legal costs. (For more on this case, see this legal update from Sompo.)

Employers can help mitigate litigation risk by reviewing and documenting their compliance with ERISA’s fiduciary duty requirements. This review should include confirming the fair pricing of the plan’s third-party service providers.

As a best practice, plan sponsors should work with experienced ERISA counsel to review plan governance and, in the event of a claim, mount a successful defense. Insurance carriers have established relationships with ERISA firms and can provide recommendations.

New and uncertain risks may impact the insurance market

Maintaining sufficient fiduciary liability coverage is also essential for managing ERISA litigation risk. For insurance brokers and their clients, recent ERISA litigation trends and the Cunningham ruling should serve as a clear sign to reevaluate ERISA risk and fiduciary liability policies. Coverage should apply to the diversity of litigation reaching courtrooms—not just to excessive fees cases.

While clients may simply be looking for a lower premium, brokers can provide valuable counsel by showing the greater range of coverage that may be found with established carriers with seasoned underwriters. Given increasing ERISA claims and legal costs, brokers should also help their clients evaluate policies for limit adequacy. In addition, it is worth considering a prospective insurer’s ability to support a strong defense should litigation arise.

The uncertain economic climate, coupled with novel approaches to ERISA litigation by plaintiff firms, could also lead to changing market conditions for fiduciary liability coverage. Time will tell. By keeping clients informed about litigation trends and key court rulings, brokers can both provide insights into evolving ERISA risks and help their clients prepare for potential changes in the insurance marketplace.