Justia ERISA Opinion Summaries

A financial advisory employee of a large securities firm participated in a compensation program called the WealthChoice Awards, which provided annual contingent cash awards to select high-performing advisors. To earn these awards, an advisor had to meet certain revenue thresholds and remain employed at the company for eight years after the award was granted. A notional, unfunded account tracked a benchmark investment, but no funds were set aside for the advisor during the vesting period. If the advisor left the company before vesting, the award was typically forfeited. After vesting, payment was mandatory and made promptly, usually while the advisor was still employed. The stated purpose of the program was to incentivize retention and productivity, not to provide retirement income.After voluntarily resigning and forfeiting unvested awards, the employee filed a putative class action in the United States District Court for the Western District of North Carolina. He alleged that the WealthChoice Awards program was an “employee pension benefit plan” under the Employee Retirement Income Security Act of 1974 (ERISA), and that it violated ERISA’s vesting and anti-forfeiture rules. The district court granted summary judgment to the employer, finding that the program was a bonus plan exempt from ERISA.On appeal, the United States Court of Appeals for the Fourth Circuit reviewed the district court’s grant of summary judgment de novo. The Fourth Circuit held that the WealthChoice Awards program is a bonus payment plan and not an ERISA-covered pension benefit plan. The court reasoned that the program’s primary purpose was to enhance retention and productivity, eligibility was limited, the awards were not funded with deferred employee income, and payment was not systematically deferred until employment termination or retirement. The judgment of the district court was affirmed. View "Milligan v. Merrill Lynch, Pierce, Fenner & Smith, Inc." on Justia Law

Retired employees of two companies, who participated in their employers’ defined benefit pension plans, brought class action lawsuits alleging violations of the Employee Retirement Income Security Act (ERISA). These plaintiffs, all married, claimed that their plans calculated joint and survivor annuity benefits using mortality tables based on outdated data from the 1960s and 1970s. Because life expectancies have increased since then, the plaintiffs asserted that using such outdated mortality assumptions improperly reduced their benefits, resulting in joint and survivor annuities that were not the actuarial equivalent of the single life annuities to which they would otherwise be entitled, as required by ERISA.Each group of plaintiffs filed suit in federal district court—one in the Eastern District of Michigan against the Kellogg plans and one in the Western District of Tennessee against the FedEx plan—asserting that the use of obsolete actuarial assumptions violated 29 U.S.C. § 1055(d) and constituted a breach of fiduciary duty under ERISA. The district courts in both cases dismissed the complaints for failure to state a claim, holding that ERISA does not require use of any particular mortality table or actuarial assumption in calculating benefits for married participants, and thus the allegations, even if true, did not establish a violation.The United States Court of Appeals for the Sixth Circuit reviewed the dismissals de novo. The court held that, under ERISA’s statutory requirement that joint and survivor annuities be “actuarially equivalent” to single life annuities, plans must use actuarial assumptions, including mortality data, that reasonably reflect the life expectancies of current participants. The court concluded that plaintiffs had plausibly alleged that the use of outdated mortality tables was unreasonable and could violate ERISA. Accordingly, the Sixth Circuit reversed the district courts’ judgments and remanded both cases for further proceedings. View "Reichert v. Kellogg Co." on Justia Law

Two former employees of a financial services company, each a participant in the employer’s defined contribution retirement plan, sued the company on behalf of themselves and other similarly situated plan participants. They alleged that the company, as plan sponsor and fiduciary, breached its duties under the Employee Retirement Income Security Act (ERISA) by selecting and retaining certain BlackRock LifePath Index Funds as investment options, which they claimed were imprudent and caused monetary losses to their individual plan accounts. The plaintiffs sought recovery of losses under ERISA sections 502(a)(2) and 409(a).The United States District Court for the Eastern District of Virginia denied the defendant’s motion to dismiss most of the claims, holding that the plaintiffs plausibly alleged a breach of fiduciary duty. It then certified a class of all plan participants and beneficiaries with investments in the BlackRock funds during the relevant period, under Federal Rule of Civil Procedure 23(b)(1), finding that ERISA fiduciary-duty claims are inherently suitable for class treatment because they are brought on behalf of the plan and that allowing individual suits would risk inconsistent standards or impair interests of absent participants. The district court also found that the commonality requirement of Rule 23(a)(2) was satisfied.On interlocutory appeal, the United States Court of Appeals for the Fourth Circuit reversed and vacated the class certification order. The Fourth Circuit held that, in the context of a defined contribution plan, claims under ERISA § 502(a)(2) for monetary losses to individual accounts are inherently individualized and cannot be joined in a mandatory class under Rule 23(b)(1), which does not provide for notice or opt-out rights. The court also held that the claims failed to satisfy the commonality prerequisite because many class members did not experience the same injury. The district court’s order was thus reversed and vacated. View "Trauernicht v. Genworth Financial Inc." on Justia Law

Janet Duke, after retiring from Luxottica U.S. Holdings Corp., elected to receive pension benefits through a joint and survivor annuity (JSA), calculated using actuarial assumptions set by her employer’s defined benefit pension plan. Duke alleged that her plan used outdated assumptions—specifically, a 7% interest rate and life expectancy tables from 1971—to convert single life annuities (SLA) into JSA benefits, resulting in lower monthly payments for her and similarly situated retirees. She claimed this systematic practice violated ERISA’s requirements for actuarial equivalence and compliance, thereby potentially harming the plan’s participants and the plan itself.In the United States District Court for the Eastern District of New York, Duke filed a putative class action seeking relief under ERISA Sections 502(a)(2) and 502(a)(3), including plan reformation and monetary repayments to the plan. The district court initially found Duke lacked standing for Section 502(a)(2) claims but later reversed itself and held that she did have standing for both plan reformation and monetary payments. The court compelled individual arbitration of her Section 502(a)(3) claims under a dispute resolution agreement but held that the “effective vindication” doctrine prevented mandatory arbitration of her Section 502(a)(2) claims. Defendants’ motion for a mandatory stay of litigation pending arbitration was denied.The United States Court of Appeals for the Second Circuit reviewed the district court’s rulings. It held that Duke has Article III standing to pursue plan reformation under Section 502(a)(2) because her alleged injury—reduced benefits due to outdated assumptions—could be redressed by reformation of the plan. However, Duke lacks standing to seek monetary payments to the plan, as such relief would not redress any personal injury she suffered. The Second Circuit also held that the effective vindication doctrine precludes mandatory individual arbitration of her Section 502(a)(2) claim and affirmed the district court’s discretionary denial of a mandatory stay. The order was affirmed in part and reversed in part. View "Duke v. Luxottica U.S. Holdings Corp." on Justia Law

Several participants in a terminated employee stock ownership plan asserted claims under the Employee Retirement Income Security Act (ERISA) following the sale and dissolution of their plan. The plan, created by A360, Inc. in 2016, purchased all company stock and became its sole owner. In 2019, A360 and its trustee sold the plan’s shares to another entity, amending the plan at the same time to include an arbitration clause that required all claims to be resolved individually and prohibited representative, class, or group relief. The plan was terminated shortly thereafter, and the proceeds were distributed to participants. The plaintiffs alleged that the defendants undervalued the shares and breached fiduciary duties, seeking plan-wide monetary and equitable relief.The United States District Court for the Northern District of Georgia considered the defendants’ motion to compel arbitration based on the plan’s amended arbitration provisions. The district court determined that although the plan itself could assent to arbitration, the arbitration provision was unenforceable because it precluded plan-wide relief authorized by ERISA. The court found that the provision constituted a prospective waiver of statutory rights and concluded that, per the plan amendment’s own terms, the arbitration provision was not severable and thus entirely void.The United States Court of Appeals for the Eleventh Circuit reviewed the district court’s denial of the motion to compel arbitration de novo. The Eleventh Circuit held that the arbitration provision was unenforceable under the effective vindication doctrine because it barred participants from seeking plan-wide relief for breaches of fiduciary duty, as provided by ERISA. The court joined other circuits in concluding that such provisions violate ERISA’s substantive rights and affirmed the district court’s invalidation of the arbitration procedure and denial of the motion to compel arbitration. View "Williams v. Shapiro" on Justia Law

Several individuals, representing a class, challenged a health insurance company’s refusal to cover gender-affirming care for transgender individuals diagnosed with gender dysphoria. The company, acting as a third-party administrator for employer-sponsored, self-funded health plans, denied coverage for such treatments based on explicit plan exclusions requested by the employer sponsors. Some plaintiffs also alleged that they were denied coverage for treatments that would have been covered for other diagnoses, such as precocious puberty, but were denied solely because of the concurrent diagnosis of gender dysphoria.The United States District Court for the Western District of Washington certified the class and granted summary judgment in favor of the plaintiffs. The district court rejected the company’s arguments that it was not subject to Section 1557 of the Affordable Care Act because its third-party administrator activities were not federally funded, that it was merely following employer instructions under ERISA, and that it was shielded by the Religious Freedom Restoration Act (RFRA). The district court also found that the exclusions constituted sex-based discrimination under Section 1557.On appeal, the United States Court of Appeals for the Ninth Circuit agreed with the district court that the company is subject to Section 1557, that ERISA does not require administrators to enforce unlawful plan terms, and that RFRA does not provide a defense in this context. However, the Ninth Circuit held that the district court’s analysis of sex-based discrimination was undermined by the Supreme Court’s intervening decision in United States v. Skrmetti, which clarified the application of sex discrimination standards to exclusions for gender dysphoria treatment. The Ninth Circuit vacated the summary judgment and remanded the case for further proceedings to consider whether, under Skrmetti, the exclusions at issue may still constitute unlawful discrimination, particularly in cases involving pretext or proxy discrimination or where plaintiffs had other qualifying diagnoses. View "PRITCHARD V. BLUE CROSS BLUE SHIELD OF ILLINOIS" on Justia Law

NCR Corporation established five “top hat” retirement plans to provide supplemental life annuity benefits to senior executives. Each plan promised participants a fixed monthly payment for life, with language allowing NCR to terminate the plans so long as no action “adversely affected” any participant’s accrued benefits. In 2013, NCR terminated the plans and paid participants lump sums it claimed were actuarially equivalent to the promised annuities, using mortality tables, actuarial calculations, and a 5% discount rate. NCR knew that, statistically, about half of the participants would outlive the lump sums if they continued to withdraw the same monthly benefit, resulting in some participants receiving less than they would have under the original annuity.Participants filed a class-action lawsuit in the United States District Court for the Northern District of Georgia, alleging breach of contract and seeking either replacement annuities or sufficient cash to purchase equivalent annuities. The district court certified the class and granted summary judgment for the participants, finding that NCR’s lump-sum payments adversely affected the accrued benefits of at least some participants, in violation of the plan language. The court ordered NCR to pay the difference between the lump sums and the cost of replacement annuities, plus prejudgment and postjudgment interest.On appeal, the United States Court of Appeals for the Eleventh Circuit reviewed the district court’s summary judgment order de novo. The Eleventh Circuit held that the plan language was unambiguous and did not permit NCR to unilaterally replace life annuities with lump sums that reduced the value of accrued benefits for any participant. The court affirmed the district court’s judgment, including the remedy of requiring NCR to pay the cost of replacement annuities and awarding prejudgment interest. View "Hoak v. NCR Corp." on Justia Law

Petitioners, representing a class of current and former Cornell University employees, participated in two defined-contribution retirement plans from 2010 to 2016. They sued Cornell and other plan fiduciaries in 2017, alleging that the plans engaged in prohibited transactions by paying excessive fees for recordkeeping services to Teachers Insurance and Annuity Association of America-College Retirement Equities Fund and Fidelity Investments Inc., in violation of the Employee Retirement Income Security Act of 1974 (ERISA) §1106(a)(1)(C).The District Court dismissed the prohibited-transaction claim, requiring plaintiffs to allege self-dealing or disloyal conduct. The Second Circuit affirmed the dismissal but on different grounds, holding that plaintiffs must plead that the transaction was unnecessary or involved unreasonable compensation, incorporating §1108(b)(2)(A) exemptions into §1106(a) claims.The Supreme Court of the United States reversed and remanded the case. The Court held that to state a claim under §1106(a)(1)(C), a plaintiff need only plausibly allege the elements contained in that provision itself, without addressing potential §1108 exemptions. The Court determined that §1108 sets out affirmative defenses, which must be pleaded and proved by defendants. The Court emphasized that the statutory text and structure do not impose additional pleading requirements for §1106(a)(1) claims and that the burden of proving exemptions rests on the defendants. View "Cunningham v. Cornell University" on Justia Law

Eric and Todd Romano, trustees of the Romano Law, PL 401(k) Plan, filed a class action against John Hancock Life Insurance Company. They claimed that John Hancock breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by not passing through the value of foreign tax credits received from mutual funds to the defined-contribution plans. The Romanos argued that John Hancock should have used these credits to reduce the administrative fees charged to the plans.The United States District Court for the Southern District of Florida granted summary judgment in favor of John Hancock, concluding that John Hancock was not an ERISA fiduciary regarding the foreign tax credits and did not breach any fiduciary duties. The court also ruled that the Romanos and the class lacked Article III standing because they failed to establish loss causation.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the district court's decision. The appellate court held that John Hancock was not an ERISA fiduciary concerning the foreign tax credits because these credits were not plan assets. The court explained that the foreign tax credits were a result of John Hancock's ownership of mutual fund shares and were not held in trust for the benefit of the plans. Additionally, the court found that John Hancock did not have discretionary authority over the management or administration of the separate accounts that would make it a fiduciary under ERISA. Consequently, the Romanos' claims for breach of fiduciary duty and engaging in prohibited transactions failed as a matter of law. View "Romano v. John Hancock Life Insurance Company (USA)" on Justia Law

Plaintiffs Marla Knudsen and William Dutra, representing a class of similarly situated individuals, filed a class action lawsuit under the Employee Retirement Income Security Act (ERISA) against MetLife Group, Inc. They alleged that MetLife, as the administrator and fiduciary of the MetLife Options & Choices Plan, misappropriated $65 million in drug rebates from 2016 to 2021. Plaintiffs claimed this misappropriation led to higher out-of-pocket costs for Plan participants, including increased insurance premiums.The United States District Court for the District of New Jersey dismissed the case for lack of standing. The court concluded that the plaintiffs did not demonstrate a concrete and individualized injury. It reasoned that the plaintiffs had no legal right to the general pool of Plan assets and had not shown that they did not receive their promised benefits. The court found the plaintiffs' claims that they paid excessive out-of-pocket costs to be speculative and lacking factual support.The United States Court of Appeals for the Third Circuit affirmed the District Court's dismissal. The Third Circuit held that the plaintiffs failed to establish an injury-in-fact, as their allegations of increased out-of-pocket costs were speculative and not supported by concrete facts. The court noted that the plaintiffs did not provide specific allegations showing how the misappropriated drug rebates directly caused their increased costs. The court emphasized that financial harm must be actual or imminent, not conjectural or hypothetical, to satisfy Article III standing requirements. Consequently, the plaintiffs lacked standing to pursue their ERISA claims. View "Knudsen v. MetLife Group Inc" on Justia Law