Excessive fee class action litigation under the Employee Retirement Income Security Act (ERISA) has dramatically increased by 35% in 2024, along with other ERISA class action cases. This surge has been particularly heavy in the last half of the year, likely relying on record-high settlements favoring plaintiffs in the past three consecutive years. While major legacy cases have reached settlement, plaintiff law firms have utilized creative legal theories to replace settled cases with new ones, including a surge of forfeiture claims against defined contribution plans and new wellness programs, excessive fee cases, and fraud claims under the Affordable Care Act (ACA).
Many of the new ERISA fiduciary breach cases center on forfeited plan assets. The plaintiffs in these cases alleged that the plan fiduciaries breached their duty of loyalty to plan participants by using forfeited plan assets to fulfill the plan’s future contributions rather than reducing participant contributions. Plaintiff firms have filed 34 of these cases to date, with six initial filings coming at the end of 2023. As more plaintiff firms have embraced this novel legal theory, 28 cases were filed in 2024, with 21 of those cases filed in the latter half of 2024.
At the same time, firms have resolved many backlogged cases. Only 153 cases remain pending, the lowest number in three years. A full 90% of the cases originally filed in 2020 have been settled, which has freed up some firms to file new cases. While the plaintiff law firms Capozzi Adler and Walcheske & Luzi continue to lead the pack, several other firms have entered the ERISA excessive fee litigation arena, often targeting smaller plans with less than $500 million in assets and some with less than $250 million in assets.
Other hallmarks of excessive fee litigation in 2024 include more claims against defined benefit plans, including pension risk transfers, and more fiduciary breach claims against health plans, including tobacco or vaccine wellness plan cases and the first excessive fee cases. Two class action suits were also filed against medical service providers, alleging fraud schemes under the ACA. Many of these claims now center on challenges to the design of plan documents, which previously were thought of as functions of the settlor who is immune from fiduciary duties.
Settlements reached a historic high of 53 in 2024, totaling $203.3 million. Nonetheless, the average settlement amount has decreased for the third year in a row, reaching $4.6 million in 2024, which would have been $3.2 million without the massive UnitedHealth settlement of $69 million. This figure is a substantial departure from the 2023 average settlement amount of $5.7 million. The decrease in average settlement figures may be representative of some plaintiff law firms accepting early cost-of-defense settlements before delving into the expense of full-blown discovery.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution for your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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