ERISA & Employee Benefits Litigation
PROTECTING RETIREMENT PLANS
Edelson Lechtzin LLP represents the interests of participants and beneficiaries in lawsuits involving a variety of employee benefits plans covered by the Employee Retirement Income Security Act of 1974, known as "ERISA". ERISA provides broad protections for participants in private (non-governmental) employer-sponsored retirement plans, Employee Stock Ownership Plans ("ESOPs"), health insurance plans, and disability plans. Below we discuss the types of employee benefits cases that our firm prosecutes. We want you to understand the protections that ERISA provides so that you can determine if it's time to hire a lawyer.
We Don't Get Paid Unless We Get a Recovery for Our Clients
In most ERISA cases, we represent our clients on a contingent fee basis. This means that we will never ask you to pay our fees or litigation costs. We only get paid if we get a monetary recovery for you and other participants in an ERISA benefits plan.
ERISA's Protections for 401(k) and 403(b) Retirement Plan Participants
Defined contribution retirement plans, like 401(k) and 403(b) plans, confer tax benefits on participating employees to incentivize saving for retirement. According to the Investment Company Institute, Americans held $7.9 trillion
in all employer-based defined contribution retirement plans as of March 31, 2020, of which $5.6 trillion
was held in 401(k) plans. See Investment Company Institute, Retirement Assets Total $28.7 Trillion in First Quarter 2020
(June 17, 2020).
In a 401(k) and 403(b) plan, "a participant's retirement benefits are limited to the value of his or her own individual investment account, which is determined by the market performance of employee and employer contributions, less expenses." Tibble v. Edison Int'l, 575 U.S. 523 (2015). However, because all risks related to high fees and poorly performing investments are borne by the participants there is little incentive for an employer to keep costs low or to closely monitor the plan to ensure every investment remains prudent.
To safeguard 401(k) and 403(b) plan participants, ERISA imposes strict fiduciary duties of loyalty and prudence upon employers and other plan fiduciaries. 29 U.S.C. § 1104(a)(1). These twin fiduciary duties are "the highest known to the law." Sweda v. Univ. of Pennsylvania, 923 F.3d 320, 333 (3d Cir. 2019) (emphasis added). Fiduciaries must act "solely in the interest of the participants and beneficiaries," 29 U.S.C. § 1104(a)(1)(A), with the "care, skill, prudence, and diligence" that would be expected in managing a plan of similar scope. 29 U.S.C. § 1104(a)(1)(B).
Unfortunately, many fiduciaries of 401(k) and 403(b) plans breach their duties of loyalty and prudence by:
- Failing to objectively and adequately review the Plan's investment portfolio with due care to ensure that each investment option remains prudent, in terms of cost and performance.
- Retaining investment options, like mutual funds, despite the availability of identical or similar investment options with lower costs and/or better performance histories.
- Failing to select the lowest cost share class for funds within the plan.
- Failing to consider collective investment trusts, commingled accounts, or separate accounts as alternatives to mutual funds, despite their lower fees.
- Failing to obtain competitive bids for administrative services for the plan, like recordkeeping.
- Using more than one recordkeeper for a plan, which subjects the plan and its participants to unnecessary and duplicative expenses.
- Engaging in prohibited transactions with plan assets.
- Continuing to offer company stock as investment option when the plan sponsor knows or recklessly disregards the fact that the price of the company’s shares is artificially inflated as a result of the company’s false and misleading statements and/or material omissions concerning the company’s financial results and future prospects.
If you believe that the sponsor of your 401(k) or 403(b) retirement plan has mismanaged your plan and wasted your retirement funds, please contact us at 215-867-2399 or complete the form below for a free case evaluation.
ERISA's Limits on Pension Plan Investments in Company Stock
ERISA prohibits traditional defined benefit pension plans from investing more than 10 percent of the fair market value of the assets of the plan in common stock or other securities that are issued by the sponsor of the plan or by any affiliate of the sponsor. See 29 U.S.C.A. § 1107. Exceeding this limit is a breach of fiduciary duties and constitutes a fraud on participants.
Notably, the 10 percent limit applies only to traditional defined benefit pension plans, but not to individual accounts in defined contribution retirement plans like 401(k) and 403(b) plans. Companies that sponsor traditional pension plans may violate the 10 percent in an illegal attempt to avoid using cash to fund their pension plans.
If you believe that the sponsor of your pension plan has improperly used company stock to fund your pension plan, please contact us at 215-867-2399 or complete the form below for a free case evaluation.
ERISA Disability Benefits Claims
In addition to protecting retirement benefits, ERISA also provides protections for employees who are covered by employer-sponsored disability insurance policies. If you have been denied disability insurance benefits, you need an experienced lawyer to take on the insurance company and appeal their adverse determination.
Continuation of Health Insurance Benefits or COBRA
ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), requires the plan sponsor of each group health plan normally employing more than 20 employees on a typical business day during the preceding year to provide "each
qualified beneficiary who would lose coverage under the plan as a result of a qualifying event... to elect, within the election period, continuation coverage under the plan." 29 U.S.C. § 1161 (emphasis added). In other words, the required notice must not only be delivered to covered employees but to qualifying beneficiaries, as well.
The COBRA notification requirement exists because employees and their family members are not expected to know instinctively of their right to continue their healthcare coverage.
Unfortunately, many employers cut corners to save money and fail to provide the required COBRA notice, using the prescribed Department of Labor forms, to all beneficiaries.
When a plan administrator fails to meet COBRA's the notice requirements under 29 U.S.C. § 1166 and 29 C.F.R. § 2590.606-4, the administrator is subject to statutory penalties of up to $110 per participant or beneficiary per day from the date of such failure. 29 U.S.C. § 1132(c)(1). In addition, the Court may order such other relief as it deems proper, including payment of attorneys' fees and expenses pursuant to 29 U.S.C. § 1132(g)(1).
If you believe your former employer failed to provide you and you family the required COBRA notice, please contact us at 215-867-2399 or complete the form below for a free case evaluation.
Prominent Judgments and Settlements
- Retirement Plans Committee of IBM v. Jander, 589 U.S. ____, 140 S. Ct. 592, 205 L. Ed. 2d 432 (2020) (co-author of amicus brief to the U.S. Supreme Court, which argued that the Court should not alter the standard to plead claims against fiduciaries of an employee stock ownership plan (ESOP), where participants allege a breach of the duty of prudence imposed by ERISA, based on the fiduciaries’ handling of inside information. This standard requires the fiduciary to determine whether public disclosure would cause more harm than good to the plan by causing a drop in the stock price and a concomitant drop in the value of the stock already held by the plan).
- Davis v. Washington Univ. in St. Louis, 960 F.3d 478 (8th Cir. May 22, 2020) (The U.S. Court of Appeals for the Eighth Circuit partially revived an ERISA class action against the University, saying a lower court incorrectly dismissed claims that the school's 403(b) retirement plan's fees were too high. The appeals court ruled that Washington University workers and retirees convincingly argued that the fees were too high because of mismanagement on the university's part).
- Lechner v. Mut. of Omaha Ins. Co., No. 8:18-cv-22, 2018 WL 6920749 (D. Neb. 2018) (defeated motion to dismiss claims of fiduciary self-dealing that harmed the 401(k) plan).
- Daugherty v. Univ. of Chicago, No. 17-3736, 2018 WL 1805646 (N.D. Ill. 2018) (defeated motion to dismiss ERISA claims alleging that defendants breached fiduciary duty of prudence by incurring excessive expenses and retaining underperforming funds; settled for $6.5 million).
- Short v. Brown Univ., 320 F. Supp. 3d 363 (D.R.I. 2018) (defeated motion to dismiss as to claim against university retirement plan fiduciaries for breach of ERISA's duty of prudence; settled for $3.5 million).
If you believe that you may have suffered losses in your retirement plan due to corporate mismanagement, please contact us at 215-867-2399 or complete the form below for a free case evaluation.