Significant Retirement Plan Litigation from 2017
2017 was another active year in ERISA litigation, especially that focusing on plan fees and expenses for defined contribution plans.
- University Fee and Expense Cases. In 2016 and 2017, fifteen universities were hit with lawsuits alleging the plans charged excessively high fees and that the plan fiduciaries had breached their duties by allowing such fees and also by failing to monitor fees and performance of the investment options.
- All but one of these cases are pending at various stages of motions.
- The U.S. District Court for the Eastern District of Pennsylvania, however, dismissed all claims against the University of Pennsylvania in September 2017. The court rejected the plaintiffs’ claims of a breach of fiduciary duties and instead concluded that the Penn plan offered an appropriate “mix and range” of investment options and applicable fees. The case is Sweda v. University of Pennsylvania, 2017 WL 4179752 (E.D. Pa. Sept. 21, 2017).
- It remains to be seen if the Penn case proves influential in the remaining cases. In several of the other cases, the plaintiffs have been more successful and survived motions to dismiss their claims.
- Standing” for Defined Benefit Plan Participants. Two federal appellate courts addressed questions about whether plan participants have “standing” to sue for breach of fiduciary duty resulting in investment losses in defined benefit plans. The Constitution requires the parties to have “standing” for lawsuits to proceed, which basically means that the parties must have something to lose. One appellate court (the Second Circuit in Fletcher v. Convergex Group, 679 F. App’x 19) held that allegations of breach of fiduciary duty is enough to provide participants with standing. Another appellate court (the Eighth Circuit in Thole v. U.S. Bank National Association, 873 F.3d 617) held that participants lack standing when the defined benefit plan is overfunded such that investment losses do not harm the participant’s ability to collect their benefits. A disagreement between two appellate courts like this can often mean that the issue takes a trip to the Supreme Court. So that may be in store for the Supreme Court’s next term (which will start in October 2018).
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