ERISA 2025: Preparing for a litany of litigation and a new administration

The Employment Retirement Income Security Act confuses even the most experienced employment attorneys and Missouri lawyers should prepare themselves for a wave of litigation as we enter 2025.
Over the past several years ERISA litigation has steadily increased. In 2024 it continued to skyrocket, according to Missouri employment attorneys. Litigation has especially focused on excessive fees, class action lawsuits and mental health parity.

With the overturn of the Chevron doctrine by the U.S. Supreme Court in the court’s decision in Loper Bright v. Raimondo, paired with a new presidential administration that promises changes relating to the Affordable Care Act, litigators and compliance attorneys have a message for their colleagues: buckle-up and stay vigilant.

50 years of ERISA

ERISA was created in 1974 and signed into law by then-President Gerald Ford. It created the minimum standards for job-based retirement, health and other welfare benefits, according to the Department of Labor, which administers the act.

It originated in the wake of the Studebaker Corporation collapse which left thousands without pensions, attorney John Westerhaus with Kutak Rock said.

“You had a bunch of businesses that were promising pensions to employees and then commingling the money needed to pay those pensions with other employer assets so that when those companies went bankrupt, the workers who worked there 30 or 40 years and had a promise made to them were left completely in the dark,” Westerhaus said. “So, ERISA evolved out of this to effectively create a funding regime where plan assets must be segregated from other employer assets and held in trust.”

This was to avoid another pension collapse from occurring that could leave employees without retirement savings when a business collapsed.

ERISA has undergone numerous changes and reforms over the years and the act celebrated its 50th anniversary in 2024.

Aside from its anniversary, 2024 was a historic year for ERISA and the Supreme Court made two decisions that will impact the future of litigation in this area.

Its ruling in Loper Bright v. Raimondo overturned the Chevron deference, and its decision to hear arguments in Cunningham v. Cornell University will resolve a circuit split regarding plaintiff pleas in prohibited transaction cases.

Lathrop GPM Partner Richard Bien said prior to the Supreme Court’s decision in Loper Bright in cases where plaintiffs challenged a federal regulation, the reviewing court deferred to the agency or administrator’s interpretation of a regulation’s text.

“In Loper, the Court held that based on the Constitution and the Administrative Procedures Act, the courts must determine the ‘best meaning’ of the regulation at issue and are not required to defer to the agency’s interpretation.  Loper applies then to any case involving a challenge to an agency regulation,” Bien said. “In ERISA we anticipate that this will impact current litigation challenging DOL ESG (environmental, societal and governance) factors impacting fiduciary duties and the ERISA fiduciary rule.”

With the overturn of Chevron doctrine, the Supreme Court said it will no longer give as much deference to agencies regarding how they interpret statutes they are charged with implementing, Husch Blackwell partner Melissa Baris said.

“While traditionally, agencies have been the ones that are interpreting the regulations that have more deference, it’s going to go back to the courts,” Baris said. “And so, the courts are going to be having more leeway to interpret what they think the statute means.”

It will take years to truly see the impacts a lack of Chevron deference will have on ERISA litigation, Craig Kovarik, another Husch Blackwell partner said.

Bien agreed and said the impact this decision will have on the individual benefit space remains untested.

Current and future challenges

Westerhaus said ERISA litigation has been increasing in “huge amounts” over the last 10 years.

“More and more fiduciary breach cases are being brought asserting that the plan sponsor or the plan administrator in operating the plan did not do so solely in the best interest of the participants and beneficiaries,” Westerhaus said. “Basically, fiduciary breach litigation.”

When this fiduciary breach litigation first grew in popularity, firms targeted billion-dollar pension and retirement funds. However, there are only so many of these large funds, and now smaller funds and businesses are being targeted by law firms as well for fiduciary breach litigation, Westerhaus said.

Breach of fiduciary duty claims occur when a beneficiary of a retirement plan brings an action against those who operate the plan, such as a plan administrator, arguing that the administrator failed in its fiduciary duty to operate the plan and maintain the funds in the best interest of the beneficiary, Bien said.

As we continue to see an increase in ERISA litigation, it is important for attorneys to recognize that there has been a shift in both the targets of litigation and the courts’ approach to evaluating ERISA claims, Polsinelli Shareholder Lilian Doan Davis said.

“Consequently, it’s important for attorneys to keep their clients up to date on regulatory changes, compliance, and stress the importance of regular audits to limit potential liability,” she said.

One of the moving pieces of ERISA litigation attorneys are watching in 2025 is the implementation of the DOL’s new fiduciary investment advice rule.

“Over a ten-plus year period the Department of Labor has promulgated and then revised a proposed regulation to broaden the definition of persons who are ERISA-regulated fiduciaries to include persons who for a fee, provide to employee retirement plan participants advice concerning their plan investments,” Bien said. “Examples mentioned in the rule include persons who are involved in HSA investing deposits, (and) persons who may provide one-time advice to a plan participant.”

That rule is suspended and is currently being litigated, Bien said. It is unclear if it will be upheld and if it is upheld, it may impact the future of fiduciary breach litigation.

“Because the DOL’s new fiduciary investment advice rule would have the effect of significantly expanding who qualifies as an investment advice fiduciary under ERISA, it’s likely that attorneys and their clients will see an increase in breach of fiduciary duty claims if the rule goes into effect,” Doan Davis said. “Many individuals who were not previously subject to the fiduciary requirements under ERISA will be subject to compliance. To minimize potential liability, it would be prudent for advisors to audit their current policies and procedures and identify areas where the rule would present potential compliance issues.”

The biggest hotspot in ERISA litigation at this time surrounds the 401k plans that most individuals are familiar with, a trend Baris said she anticipates will continue in 2025.

“You’re going to continue to see disputes about whether plans can enforce arbitration clauses and class action waivers,” Baris said. “The Supreme Court recently denied cert on a case presenting that issue. So, you’re going to continue to see courts fighting that out. Supreme Court did accept cert on a case that’s going to talk about what you need to do to show prohibited transaction and party interest — I think we’re going to see a lot of litigation on that.”

Baris said she foresees a continuation of these lawsuits under formal case plans as circuits try to determine what pleading standards need to be shown and what needs to happen to state a claim under the mismanagement of claims. It’s an issue attorneys hope will be addressed by the Supreme Court when it rules on Cunningham v. Cornell University.

“We’re going to also continue to see a heightened level of litigation on health and welfare side,” Kovarik said. “One of the issues we continue to see (is) continued lawsuits challenging the ACA and all the messes associated with that. With the new Trump administration, we’ll likely see some changes as it relates to the ACA.”

One example of these changes is how the ACA will impact gender affirming care under the new administration, Kovarik said.

Mental health coverage with the new mental health parity rules also will likely be a hotbed for litigation under the Trump administration, just as it has been under the Biden administration, Kovarik said.

The mental health parity act has been around for years and the purpose behind it is to require plans to provide equal coverage for both physical and mental health, he said. When companies fail to provide this parity, they open themselves up to litigation.

New mental health parity rules were introduced in 2024 to help enforce the mental health parity act and provide clarity, Baris said. 2025 will determine how these rules play out in litigation.

Additionally, but less importantly, attorneys are keeping an eye on the SECURE Act 2.0.

SECURE 2.0 is a broadening of SECURE 1.0 and its proposed changes include adjustments to automatic enrollment requirements, catch-up contributions, age requirements and withdrawals.

Because many of the provisions of SECURE 2.0 are optional, it likely won’t have a massive impact on litigation.

“From a litigation standpoint at this moment, other than whether that act is viable or not, it’s unlikely to create litigation between individual plan participants and their employers,” Bien said. “The employer is not obligated to provide these benefits. The statute applies only if you do provide these benefits.”

The rule is currently on hold and is not yet effective due to pending litigation of the rule, Bien said.

What attorneys should prepare and plan for in 2025

With the increase in ERISA litigation, there’s a lot more risk for plan providers, Westerhaus said.

“Because ERISA compliance is very, very technical and because the plan’s expenses and fees are public record you are going to be a target if you are not following a prudent governance process,” Westerhaus said.

What Westerhaus and his firm are monitoring in the ERISA space moving into 2025 is what the fiduciary breach litigation targets have been and what the arguments were in those cases, what the future holds for Environmental, Social and Governance investment principles and how the end of Chevron deference might impact the interpretation of regulations.

With a new administration being sworn in on Jan. 20, the regulatory landscape is murky as the DOL under different administrations may have different enforcement priorities.

Bien said moving into the new year, he is continuing to watch unfolding 401k litigation revolving around two central questions — whether the fees and expenses charged to the plan participant or to the plan itself were excessive or proper and questioning the investment lineup offered in the 401 K. Similar litigation surrounding excessive fees has cropped up in issues relating to health plans, he said.

“One thing we’re keeping an eye on are similar theories being applied to health plans,” Bien said. “There are a number of plaintiff firms prospecting these cases. They are sending out messages on LinkedIn and it seems likely that current or former participants in employer sponsored plans may claim that the charges to the plan were excessive (and) that there may have been self-dealing with respect to some of the benefits offered. We haven’t seen many of those cases filed yet, but we think that may be the next wave of class action cases.”

The Department of Labor publishes its investigative priorities on its website and has made clear it is interested in enforcing parts of the ACA as it relates to mental health parity, Bien said. He and his firm are monitoring this priority as well as others maintained by the DOL as it can sometimes forecast future litigation trends.

Any litigation, even if the defense wins in the end, comes with a hefty price tag companies and plan fiduciaries should be aware of, Baris said. Often this litigation is brought as a class action and the company or defendant is dependent on the circuit court ruling to dismiss the action.

“Once you get past the motion to dismiss, the company is looking at a really, really expensive class action with big dollar amounts at issue,” Baris said. “There’s a lot of incentive for plaintiffs’ lawyers to bring lawsuits that have the capability of being brought as a potential class action and big settlement amounts.”

The key to avoiding this expensive litigation is compliance. Kovarik said this often requires legal or advisement teams who can assist with this as attorneys see technical law changes that may impact ERISA regulation.

“Employers and plan sponsors need to one, be aware of these significant changes, they need to continue to be aware of the increased litigation and continue to really make sure that they take proactive steps to sort of review their internal policies and procedures as it relates to these benefit plans,” Kovarik said. “An example is making sure that you have fiduciary committees and plan committees that you know are taking steps and monitoring and taking care of these plans separate and independent of the roles as an employer as a business.”